The Economist - USA (2022-05-21)

20 BriefingThefoodcrisis TheEconomistMay21st 2022

world’s  calories,  and  more  than  18%  of  its

grain,  crosses  at  least  one  border  on  the

journey from plough to plate.

At  the  beginning  of  2022  the  world­

spanning system which makes this possi­

ble was already in a ropey state. The num­

ber  of  people  with  access  to  food  so  poor

that  their  lives  or  livelihoods  were  at  im­

mediate risk had risen from 108m to 193m

over  the  past  five  years,  according  to  the

un’s World Food Programme (wfp). A lot of

that near­doubling of “acute food insecuri­

ty”  was  due  to  the  covid­19  pandemic,

which  reduced  incomes  and  disrupted

both farm work and supply chains; a good

bit more was down to rising prices of ener­

gy  and  shipping  as  the  effects  of  the  pan­

demic  wore  off.  Things  were  made  worse

by  swine  flu  in  China  and  a  series  of  bad

harvests  in  exporting  countries,  some  of

which were due to La Niña conditions that

began  in  the  middle  of  2020.  La  Niña  is  a

recurrent pattern of currents and wind pat­

terns  in  and  over  the  equatorial  Pacific

which has worldwide effects, just as its al­

so­troublesome counterpart El Niño does. 

Global  grain  stocks  were,  admittedly,

quite  high.  But  they  were  mostly  in  the

hands  of  well­off  importing  nations,  not

those of exporters keen to sell them or poor

importers  likely  to  need  them.  “If  we  do

not  address  the  situation  immediately,”

David Beasley, who runs the wfp, told the

Munich  Security  Conference  in  February,

“over  the  next  nine  months  we  will  see

famine,  we  will  see  destabilisation  of  na­

tions and we will see mass migration.”

Just six days after he spoke those words

Russia rammed a rifle barrel into the alrea­

dy creaking machinery. In 2021 Russia and

Ukraine were the world’s first and fifth big­

gest  exporters  of  wheat,  shipping  39m

tonnes and 17m tonnes respectively—28%

of the world market. They also grow a lot of

grain used to feed animals, such as maize

and  barley,  and  are  the  number  one  (Uk­

raine) and number two (Russia) producers

of  sunflower  seeds,  which  means  they

have 11.5% of the vegetable­oil market. All

told, they provide almost an eighth of the

caloriestradedworldwide.

Ukrainianfoodexportswerepromptly

throttledby thewar; Russianoneswere

dentedbytheindirecteffectsofsanctions.

Grainpricesshotup.Havingfallenbacka

littleastheshockworeoff,theyarenowon

theriseagain.OnMay16th,thefirstdayof

trading after India imposed its restric­

tions,wheatpricesinChicago,theglobal

benchmark,roseby6%;onMay18ththey

were39%higherthantheywerewhenRus­

sialauncheditsinvasion.

America’s department of agriculture

(usda) reckonsthatwarandbadweather

meanglobalwheatproductionislikelyto

fallforthefirsttimeinfouryears,whichis

bad.Whatisworseisthatwheatisnotreal­

lytradedglobally.Buyersoftenhavelong­

standingbilateralrelationships withex­

porters andsetchannelsoftradewhich

makeswitchingsuppliershard.According

totheun’s FoodandAgricultureOrganisa­

tion(fao) nearly 50 countriesdependon

eitherRussiaorUkraine,orboth,formore

than30%oftheirwheatimports;for 26 of

themthefigureisover50%.

Thatit shouldcometothis

EastAsiancountrieswhichimporta lotof

BlackSeawheat,suchasIndonesia,can

fairlyeasilyswitchtorice.Formostother

bigimporterscuttingoffwheatwouldin­

volvedrasticchangesindiet.Manycoun­

triesinthePersianGulfandnorthAfrica

eatatleasttwiceasmuchbreadperperson

as gluten­loving Americans.Some grain

canbedivertedfromothermarkets,atthe

rightprice,andEuropeanfarminginter­

estssaythatgovernmentsarecomingto

themactivelyseekingdeals:“Everythingis

onthetable”,saysa bigFrenchproducer.

Still,shortfallsseemcertain.Thewfp,

onwhichmorethan115mpeopledepend,

andlastyeargot50%ofitswheatfromUk­

raine,saysthecrisiscoulddrive47mmore

peopleintoacutefoodinsecurity.

The warisalsohavingeffectsonthe

thingsfarmersneedtogrowfoodinthe

firstplace—andthusonhowmuchthey

willplantintheseasonstocome.Farms

runonfuel.WithRussiatheworld’sbig­

gestnatural­gasexporteranditssecond­

biggestoilexporter,fuelpriceshaverisen.

Farms also need fertiliser. Of the three

maintypesofindustrialfertiliserRussiais

thebiggestexporterinonemarket(nitro­

gen­basedfertilisers,theonlyexpensive

ingredientofwhichisnaturalgas),thesec­

ondbiggestinanother(potash,whichpro­

videspotassium)andthethirdinthethird

(phosphates). Pesticides and herbicides,

oftenproducedfromhydrocarbons,have

alsogoneupinprice.

Thereisa lengtheningshadowoveran­

otherofthefarmers’prerequisites,too—

onewhichpredatesthewarandwillout­

lastit.Goodharvestsneedgood,oratleast

moderate, weather. They are not well

servedby extremes.But climatechange

means extremes are increasingly what

theyget.AnalysisbyBritain'sMetOffice

showsthatglobalwarminghasmadean

extremeIndian heatwavelikethisyear’s

100 timesmorelikely.

Andglobalmarketsmeantheeffectsof

theseextremescanaddupina waythat

goesbeyond thegloballycorrelated pat­

ternsofdisruptionbroughtonbythesee­

sawingofLaNiñaandElNiño.Thedeluge

which forced Chinese farmers to delay

plantingwinterwheatlastyear,thusre­

ducingthisyear’sexpectedharvest,andIn­

Not over yet

Nominal prices, February 24th 2022=

Sources:Bloomberg;CRU;TheEconomist *Brent

Russiainvades

Ukraine

150

125

100

75

50

25

2021 2022

Crude oil*

Wheat

Fertiliser

The Economist’s

food-price index

Source:ObservatoryofEconomicComplexity

Where the wheat goes

↓

Imports from

Russia and Ukraine

Exporter Importer % of all wheat imports

Wheat trade, 2020, $bn

Ukraine4. 6

Russia 1 0.

2.

75.

5.

26.

54.

87.

12.

22.

76.

4.

Egypt 4.4 85.

Indonesia 0.

Pakistan 0.

Bangladesh 0.

Lebanon 0.

Tu r ke y 1. 9

Other Asia 1.

Other Europe 0.

Other Middle

East and north

Africa 1.

Sub-Saharan

Africa 2.

Americas 0.