Ukraine War: Why did Putin’s invasion cause a worldwide food crisis and what can be done? | World News

The head of the United Nations says there is a global food crisis looming due to the impact of Russia’s invasion of Ukraine.

Rising inflation – fueled by higher energy prices as the West pulls away from Russia’s oil and gas supplies – has been exacerbated by rising food prices, leading to fear that many of the poorest people in the world will not be able to support themselves.

G7 finance ministers met on Thursday to address the immediate effects of Vladimir Putin’s war in Ukraine and the COVID-19 pandemic, which has also caused prices to rise.

And on Wednesday, officials from the US and the World Bank rolled out a multibillion-dollar plan to try to offset the risks.

But what is making the situation so dire?

Dish

The problem stems from the fact that Russia and Ukraine are major exporters of some of the world’s largest staple foods.

According to the United Nations Conference on Trade and Development, they are responsible for 53% of the global trade in oil and sunflower seeds and 27% of the trade in wheat.

Currently, Ukraine has a large amount of wheat in reserve, which, due to the war, cannot be exported.

Aside from the fact that many shipping companies that will ship that wheat or oil around the world won’t accept the risk that their ships will get caught up in a skirmish, satellite photos have revealed that people Russia is actually blocking ships from moving to and from ports on the Black Sea that are so important for exports.

Louise Jones, of McKenzie Intelligence, told Sky News: “Odesa and Mykolaiv are two of the important grain export ports.

“Mykolaiv is on the Dnipro river and you can see pretty clearly on the satellite imagery that the Russians have a string of barges at the mouth of the river, so it’s been blocked pretty effectively. And you can also see a string of barges at the mouth of the river. Russian corvettes are lurking nearby.

“Odesa, unlike Mykolaiv, wasn’t stopped, but we know they’ve placed minefields and the problem with minefields is that the Russians who have placed them aren’t really sure where they are.

“And then you’ve got the Black Sea fleet, capable of reacting. It’s no longer a flagship, but still has frigates and corvettes, which are very difficult to push aside.”

She said that although she was not aware that the Russians posed a direct threat to any shipping company, they “couldn’t take the risk”, try to dock and load with export food.

“You need very solid guarantees before you risk taking an expensive train past some of these guns.

“We do a lot of work for the insurance industry, tracking marine assets. These things are saying that … they will pick it up after the war, they are not insured to initiate a movement. radiate.“

Although Russia is not under blockade, it is subject to severe Western sanctions, which can affect its ability to trade with countries around the world.

Why are wheat and sunflower oil so important?

While much of the developing world uses most of its food energy from rice, in many parts of the world imports of wheat and oil provide the majority of the calories people consume.

According to the World Atlas, it is estimated that wheat provides 15% of the world’s calories, along with vegetable oils (of which sunflower oil is just one of four), providing an additional 10% of the energy humans need. consume.

Demand is unlikely to drop, so when giant suppliers like Ukraine and Russia can’t export much, prices are bound to rise.

Adding fuel to the fire are defensive moves by other major producers, with countries such as India banning wheat exports on Saturday, in part due to a scorching heatwave that has slashed output and Indonesia. , the world’s top palm oil exporter, stopped exporting crude oil. palm oil (CPO) and some derivatives in late April in an effort to control domestic prices.

Meanwhile, in some parts of France, extremely dry weather has caused severe damage to cereal crops as the country experienced record temperatures in May, a key month for growth. development of the winter crop.

Experts say heavy rainfall in early June will be needed to allow those in major production areas of the European Union’s biggest cereal producer to get through.

What has affected prices worldwide?

Wheat prices have skyrocketed since the invasion of Ukraine on February 24.

One of the benchmarks for worldwide wheat prices – the price of a bushel of wheat according to the Chicago Board of Trade (CBOT) index – hit a high in early March and around the last week.

Because of the war, of course, the situation in Ukraine is unlikely to improve, with many areas either occupied by Russia or only affected by the impact of a large number of Ukrainians – some of whom may did farming – occupied to shuttle what. they see as an invader.

The International Grains Council on Thursday cut its 2022/2023 wheat production forecast from 780 million to 769 million tonnes.

Meanwhile, vegetable oil prices also increased.

As with a number of other commodities, prices for many vegetable oils were already very high before the invasion, says the International Food Policy Institute. Since then, however, the price of vegetable oils has increased by an average of almost 30%.

Who is most likely to be affected?

While Ukraine exports a large amount of grain to countries around the world, its main customers tend to be in Asia and Africa.

According to the United Nations Conference on Trade and Development (UNCTAD), as many as 25 African countries, including many of the least developed countries, import more than a third of their wheat from two countries. there is war.

For 15 of them, the market share is more than half.

In addition, the World Food Program – which feeds some 125 million of the world’s poorest people – buys 50% of its grain from Ukraine.

It prompted United Nations Food Director David Beasley to appeal directly to Russian President Vladimir Putin on Wednesday, saying: “If you have any heart, please open it up. [Ukraine’s] ports. “

“Failure to open ports would be a declaration of war on global food security, leading to famine and instability of nations as well as mass migration out of necessity,” he said.

“This is not just about Ukraine,” he added. “This is the story of the poorest of the poor all over the world, who are on the brink of famine as we speak. So I ask…open these gates.. . so that we can feed the poorest of the poor and prevent hunger, as we have done in the past, when the nations in this room grew together.”

Fertilizer

But the threat to food supplies around the world doesn’t just come from problems with Ukraine and Russia’s wheat supplies.

Rising energy prices have had a huge impact on the cost of producing the fertilizers needed to grow crops in abundance around the world. This is because fertilizer production is particularly energy-intensive.

And, Russia and Belarus – which have backed Moscow’s intervention in Ukraine and are also subject to sanctions – are the sources of more than 40% of the world’s exported crop nutrient potassium.

The impact was seen in fertilizer prices, although it was relatively localized, as illustrated by this chart showing the price of a particular nitrogen-based fertilizer sold in Middle Eastern countries.

There are deeper and deeper swirling effects stemming from Russia’s invasion of Ukraine, and the ensuing sanctions against Vladimir Putin’s regime – some of them perhaps yet to emerge.

One thing that has been predicted – which will drive up food and energy prices as well as the cost of all goods – is the impact on worldwide freight movement, the cost of which depends entirely on fuel.

What could be the consequences?

As people around the world reel from the shock of soaring food prices, The IMF has predicted that there may be instability.

There are signs that rising energy prices are having an impact – with violence in Sri Lanka partly blamed on fuel price hike.

Food prices are adding to Sri Lanka’s woes with inflation hitting 29.8% in April, when food prices rose 46.6% year-on-year.

In recent days, reports suggest unrest has broken out in Iran, amid protests against rising food prices.

The risk of instability was highlighted by UNCTAD in a report in March that looked at how similar food price shocks have coincided with unrest over the past decade.

“The long-term effects of rising food prices are difficult to predict, but analysis of historical data by UNCTAD has shed some light on worrisome trends,” one report said. points to food commodity cycles coinciding with major political events, such as the 2007-2008 Food Riots and the 2011 Arab Spring.

What about in the UK?

The impact on the UK is difficult to gauge as the UK is not dependent on Ukraine or Russia for its wheat supply.

Indeed, while the amount imported from each country varies from year to year, UK flour millers mainly import wheat from Germany, France, the US and Canada, according to the body representing Germany. surname.

However, that does not mean the UK is immune.

Alex Waugh, director of UK Flour Millers, said in March that “market prices rose sharply after an earlier rise due to relatively poor harvests in 2021. It is inevitable that in time they will increase pepper prices foodstuffs that depend on cereals as a primary input. These include commodities such as bread but also many other foods such as eggs, meat, etc”.

What can be done about it?

United Nations Secretary-General Antonio Guterres on Wednesday said he is in “strong contact” with Russia, Ukraine, Turkey, the United States and the European Union in an effort to restore grain exports from the United Nations. Ukraine.

Mr Guterres said he was “hopeful” for an agreement to ease the problem and that Russia would allow grain exports to be stored at Ukrainian ports and ensure unlimited access to Russian food and fertilizers. with global markets.

But he also told a ministerial meeting “there is still a long way to go”.

Consulting firm IKAR said Russia could export more wheat next season due to large harvests and stocks, raising hopes.

But the chances of that vanished on Thursday as Russia appeared to rule out any chance of a breakout, with Moscow insisting that sanctions would have to be revisited if it were to open up. Ukraine’s grain exports – something the West can hardly consider.

Interfax quoted Russian Deputy Foreign Minister Andrei Rudenko as saying: “You must not only appeal to the Russian Federation, but also deeply consider the whole complex reason that has caused the present food crisis and, first of all, these are sanctions. have been imposed by the US and EU against Russia that interfere with normal free trade “,

Louise Jones told Sky News that the blockade is unlikely to be breached by NATO or Ukraine, even if Ukraine is provided with advanced weapons.

“It would be an open confrontation with Russia that I think NATO has stayed away from,” she said.

“The Ukrainian Navy is not in that position.

“At this stage, the only way out would be through the United Nations. It would be good PR for Putin to be convinced that the Russians escorting grain ships to the world would be a good PR move. So we’re basically waiting for Putin’s goodwill.”