Interview: Ukraine and the Global Food Crisis
The Hundred #13: June 1, 2022
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Joseph Glauber is a Senior Research Fellow at the International Food Policy Research Institute. He’s an expert on price volatility, global grain reserves and trade. Glauber was previously Chief Economist at the U.S. Department of Agriculture. Our questions are in bold, his answers in quotation marks.
It’s hard to imagine the scale of this food crisis. What exactly are we dealing with?
“Prices for many agricultural commodities are at (nominal) record levels, in part due to the war in Ukraine and in part due to many factors that pre-dated the war. Food supplies are adequate to meet needs but with high prices, many poor households will be unable to purchase sufficient quantities of food increasing global hunger.”
Can you put this into historical context?
“For wheat, the last time markets were this tight was in 2007/08 and 2010/11 when we saw record high prices for wheat.”
Can you tell us what this might look like for a family in rural Egypt?
“Egypt is the world’s largest importer of wheat. It imports a total of 12-13 million tons annually. With a population of 105 million growing at a rate of 1.9% a year, Egypt has become increasingly dependent on imports to meet food needs. Imports of cereal crops have been steadily increasing over the last three decades at a rate higher than that of domestic production.
Wheat prices have risen 30-40% since the invasion of Ukraine. Without the government safety net which subsidizes bread prices, much of those increases would be passed on to consumers. The degree to which the government can contain retail price increases will depend on the duration of the price increase and available public monies on which they can draw.”
Was food supply stable before Russia’s invasion of Ukraine?
“Ongoing fallout from the COVID-19 pandemic and other factors have already driven up food prices. Poor harvests in South America, strong global demand, and supply chain issues have reduced grain and oilseed inventories and driven prices to their highest levels since 2011-2013. Vegetable oil prices have also been at record levels, reflecting the short South American soybean crop, reduced palm oil supplies due to harvest problems in Malaysia, and sharply increased use of palm and soybean oil for biodiesel production. Prices of key energy-intensive inputs like fuel, fertilizer and pesticides have also been at near-record levels.”
Why is Ukraine so important for food production?
“Ukraine accounts for about 6 percent of agricultural production calculated on a kilocalorie basis. They export about 10 percent of the wheat, 13 percent of barley, 15 percent of maize and 50 percent of sunflower oil traded in the world.”
In what ways is the invasion affecting supply?
“Because of the war, Ukraine ports are blocked which has left about 20 million tonnes of grain from last year's harvest stranded within the country. Some grain has moved west by rail and barge to ports in Romania and by rail to the Baltic Sea, but the costs are 4 times that of moving through normal channels through the Black Sea. Because of the war, Ukraine is unable to harvest a portion of its wheat crop, about 25% to 33% is located in areas currently in conflict. And the war has disrupted spring plantings, particularly in conflict zones but also because the war has driven up fuel prices and affected the availability of fuel, fertilizer and other inputs.”
What are vulnerable countries doing to try to protect their people?
“Large net food importing countries like Egypt are trying to mitigate the impact of higher wheat prices through bread subsidies. The challenge is that many of these countries have high debt burdens because of COVID and are struggling to find resources to deal with high food prices.”
How can rich countries help?
“In the short run, primarily through humanitarian aid. Prices are high giving producers ample incentives to plant so countries should not try to distort production decisions away from market signals. Countries should avoid policies like biofuel mandates which divert production to non-food uses. Countries should avoid export restrictions which penalize domestic producers and exacerbate supply shortages in global markets.”
What needs to be done to prevent this from happening again?
”The war aside, droughts happen around the world and occasionally we see big shortfalls. This will likely be exacerbated by climate change. Trade is very important for countries to meet needs during such times. So markets need to be open and free of distortions. Over the longer term, we need to increase productivity, particularly in developing countries where often the gap between actual yields and yield potential is greatest. That will take a renewed commitment through R&D to increase productivity.”
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What different this time for Egypt is it produce more Natural gas than it had in 2011 + prices are 2X higher...