The ongoing war in Ukraine has thrown a new wrench in the well-oiled machine that is the global community. Disruptions caused by these events build upon the previous upheaval caused by the pandemic in sectors such as public health and energy security. However, a new threat now looms on the horizon: rising food prices and a serious risk of global food shortages.
The three countries most involved in the conflict — Ukraine, Russia, and Belarus — are heavily involved in the global production of crops and fertilizers. War in this region is bound to send a sizeable shock throughout the world’s supplies and price of food.
Russia and Ukraine, combined, account for one-quarter of the world’s exports of wheat, and around half of all sunflower and sunflower products (such as cooking oil) exports. Ukraine is also a major exporter of corn. One of these countries is being invaded, while the other is being hit with international sanctions as a response; in other words, neither of them can realistically speaking put the same amount of these staple foods to market as previously.
Furthermore, Russia and Belarus together account for a large proportion of all the world’s exports of potash, a vital ingredient for agricultural fertilizers. With both of these countries embroiled in a war, hit with sanctions, and quite willing to get back at those who imposed the sanctions, we can see trouble ahead for the agricultural sector.
The areas that rely heavily on Ukrainian and Russian wheat exports (mainly the Middle East and Africa) will be directly impacted by the ongoing hostilities and will be affected to the greatest extent. Analysts say that these areas should prepare to see increases in the price of everyday food items virtually across the board. Egypt, Turkey, Bangladesh, Indonesia, Pakistan, and Yemen are the single largest importers of wheat globally and stand to be the most affected.
However, most or all countries around the world should expect to see a similar increase in the price of foodstuffs due to the prices of packaging and shipping being impacted by the war, as well as due to the greater economic disruptions that the conflict has caused. The impact of the war on the fertilizer industry is especially concerning.
Talking to the BBC, Svein Tore Holsether, the CEO of Yara International (one of the world’s largest producers of agricultural fertilizers), explains that the situation is quite grim. Fertilizer prices were already high due to recent increases in the wholesale prices of natural gas, which is essential for the production of ammonia, a key component of nitrogen fertilizers. The added impact of the war in Ukraine is likely to cause a real crisis, he explains.
“Half the world’s population gets food as a result of fertilizers (…) and if that’s removed from the field for some crops, [the yield] will drop by 50%,” Mr. Holsether said. “For me, it’s not whether we are moving into a global food crisis – it’s how large the crisis will be.”
“We’re getting close to the most important part of this season for the Northern hemisphere, where a lot of fertiliser needs to move on and that will quite likely be impacted.”
The Norwegian-based company explains that it is not directly affected by sanctions leveled at Russia, but that does not mean it is immune to them, either. These measures have caused immense disruptions in the shipping industry which affects every level of the economy, so shipments are very hard to secure. The Russian government has also advised domestic producers of fertilizer and fertilizer-associated materials not to export their products as a retaliatory measure against the sanctions imposed on them.
Furthermore, Yara is having trouble setting up alternative sources of raw materials for its fertilizers on short enough notice for the upcoming spring. Apart from natural gas, the West also relies heavily on Russian and Bielorussian potash and phosphate.
“We’re doing whatever we can do at the moment to also find additional sources. But with such short timelines it’s limited,” Mr. Holsether added.
Shortages of fertilizer could translate to higher operating costs for farmers together with lower yields — leading to food insecurity and significant rises in the cost of staple grains and a wider pallet of goods.
Agriculture under pressure
Climate change and freak weather are already placing farms under increased stress, as is the growing number of people on the planet. This is not a good background against which to have food shortages — and if there’s anything we’ve learned in the past couple of years, it’s that our globalized world isn’t immune to shortages.
Still, where globalized supply chains stand to be heavily impacted by the current war, they also hold some promise to address the situation. Romania, an EU member state and neighbor of Ukraine, is also a strong exporter of grain and traditionally considered part of Europe’s breadbasket. Romanian Agriculture Minister Adrian Chesnoiu recently told reporters that the country is expecting no trouble covering its internal demand for wheat and even has a sizeable surplus for export that can be used to partially compensate for the expected shortage. This excess production can help cover some of the demand and ease the blow of the Ukrainian war on food markets.
“Traditionally we are an exporting country because we produce more than we consume,” FiancialPost quotes Chesnoiu as saying. “On a good year, Romania produces over 11 million tons of wheat while domestic consumption is somewhere around 4.3 million, that’s why I said Romania is not in the situation of the other states which are trying to ensure their internal consumption.”
“From the assessments we have made at the ministry so far there is no risk that the population cannot be supplied.”
Nearby Poland is in a similar spot, as a traditional exporter of wheat. Apart from Russia and Ukraine, the United States, Canada, France, and Australia are also important net exporters of wheat.
The real crux of the issue is how agricultural production will fare in the case of a wide-scale shortage of fertilizers. Industrial fertilizers are produced using potassium salts mined from deposits deep underground, and they have precious few alternatives — and virtually none of them can take over in such a short amount of time.
A silver lining of this crisis is that it may very well force us towards new and more sustainable sources of fertilizer for our crops. Compost is an age-old option, which has the potential to be used on an industrial scale, as is manure. Other more exotic options include insect-sourced fertilizer, mixing different types of crops that can support the development of each other, or developing the extraction of potassium from fresh sources. Biochar could also have a part to play in fattening our crops.
Still, implementing new approaches, especially on an industrial scale, takes time, and spring is upon us. Hopefully, the world will have time to adapt, or this war ends and things go back to normal before our grain supplies really start to dwindle. Because nobody wants to go hungry.