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The world is facing the threat of hunger: why food is becoming more expensive

— Are Russia and Ukraine really such large global producers of agricultural products that a conflict between our countries can provoke such a significant increase in food prices on a global scale?

— Food prices have already been rising due to the coronavirus attack for the past two years. The conflict in Ukraine, unfortunately, exacerbates this negative trend. Russia in recent years has become the largest supplier of wheat to international markets. Ukraine in the table of ranks of the main exporters of this product takes the fifth place. They account for more than a third of the world’s grain exports.

— What do these two countries supply to other states and in what volumes?

– The total share of the two countries in the global supply of barley is 19%, wheat – 14%, corn – 4%. There are 50 countries on the list of trading partners that are more than 30% dependent on these grain supplies. Many of these countries, located in northern Africa, Asia and the Middle East, are classified as least developed or low-income food-deficit countries. In addition, Russia and Ukraine are world leaders in the supply of rapeseed oil, they own a total of 52% of the sunflower oil market.

— Which countries are the main buyers of Russian agricultural products? How much will they suffer: which products will increase in prices, which product groups may be in short supply?

— In 2021, Russia exported a total of 32.9 million tons of wheat and meslin (a mixture of wheat and rye, usually in a ratio of two to one). Turkey is 70% dependent on Russian wheat supplies, while countries such as Egypt, Qatar, Rwanda and Kyrgyzstan are 80% dependent. Other major importers of this product include Lebanon, Tunisia, Yemen, Libya and Pakistan.

And, basically, Russia sells wheat to countries that have not yet imposed sanctions against it. Of the total wheat exports of $8.9 billion for 2021, Egypt, Latin America, Africa account for 90% of sales. While, for example, the European Union – only 6.5% ($577 million).

At the moment, it is difficult to predict the scale and geography of the coming food shortage associated specifically with the Russian-Ukrainian conflict. Much will depend on how the situation develops. However, the world market is already reacting with a sharp increase in prices for grain and sunflower oil.

– Can this conflict provoke famine in some corners of the planet?

– According to FAO forecasts for February – without taking into account the possible consequences of the conflict – for the remainder of the 2021-2022 season (March 1 – June 30), it is assumed that Ukraine will be able to export approximately 6 million tons of wheat and 16 million tons of corn. The Russian Federation is able to export about 8 million tons of wheat and 2.5 million tons of corn.

Most likely, this forecast will have to be corrected. In Ukraine, sowing and harvesting is under threat. Migration has led to a reduction in labor resources, the agricultural sector simply will not have enough workers.

Russia has more opportunities to fulfill contractual obligations for the supply of agricultural raw materials and food to foreign partners. But there are many difficulties, for example, with freight, insurance, logistics.

Of the risk factors, one should also highlight one more: high demand and volatility in natural gas prices have thrown up the cost of mineral fertilizers. Thus, prices for the main nitrogen fertilizer (urea) have tripled in 12 months.

– How can the conflict in Ukraine affect the food market in Russia? What will happen to prices and assortment?

— The sanctions imposed by Western countries against Russia hit primarily the trade and financial sector and immediately affected the exchange rate and solvency of the Russian currency. The cost of loans, prices for imported components have grown: seed and genetic material in crop and livestock production, feed additives, vitamins and veterinary drugs. This will inevitably lead to an increase in prices for their own products within the country.

In addition, Russia is already facing an embargo from Western countries on the supply of many technological components and equipment. There is a temporary, and possibly permanent conservation of production in the agri-food sector of large foreign corporations. Food supply chains will be disrupted. The response of the market is expected: an increase in the cost of production, causing a reciprocal increase in wholesale and retail prices, which directly hits the consumer’s wallet.

In the context of Western sanctions, the Russian government resorts to protectionist measures to protect the domestic market and ensure its own food security. A ban has been introduced on the export of grain (wheat and meslin, rye, barley and corn) to the countries of the Eurasian Economic Union (EAEU). At the same time, an exception is provided for supplies under export licenses issued by the Ministry of Industry and Trade. A similar ban applies to the export of white sugar and raw cane sugar to third countries.

Attempts are being made to monitor and control, primarily the dynamics of retail prices and the availability of essential goods in retail outlets. At the same time, the effectiveness of such “fire fighting” measures is doubtful and, most importantly, does not eliminate the causes of the food crisis. There is reason to believe that the Russian government understands the complexity of the new challenge.

– How does FAO feel about restrictive measures in international food trade and what steps is it taking on its part to smooth the situation?

— Guided by world experience, FAO is convinced that global trade in food and mineral fertilizers should not be restricted. Reducing import tariffs or imposing export restrictions can help overcome a country’s food security problems in the short term, but it can also push up prices in global markets.

Commodity distribution chains must work, it is necessary to ensure the protection of standing crops, farm animals, infrastructure for the processing industry, and logistics systems. This is impossible in the conditions of an armed conflict, when the fields are not at all peaceful tracked vehicles.

Support should be provided to vulnerable groups, including internally displaced persons. Now the Ukrainians are suffering first of all. Today, according to the UN, the number of refugees in Ukraine has approached 3 million people, and internally displaced persons – to 2 million. The UN is conducting a large-scale emergency operation for the population of Ukraine, the cost of which is $1.87 billion.

As part of these efforts, FAO has begun to help the rural population of Ukraine, providing them with the most necessary things to support their farms – seeds, fertilizers, as well as small amounts of money, only $50 million. This will help support up to 100 thousand households in these difficult days or 240 thousand villagers.

– Let’s sum up: what threatens the world with the current food crisis?

– As for its consequences for the world’s population, food and resource prices have entered an area of ​​increased volatility. And everywhere in the world. If, moreover, the conflict taking place in Ukraine significantly reduces the production of agricultural products, leads to a drop in the effective demand of the population, to the cessation of agricultural exports, then very negative consequences will manifest themselves. What exactly? From hotbeds of humanitarian crises, local and regional deterioration in food security, to worsening global hunger, which affected 811 million people in 2020.

We note with regret that the goal set by the UN of the complete elimination of world hunger by 2030, which is already under threat due to the COVID-19 pandemic, is unlikely to be achieved.

By how much have food prices increased in the world over the past year,%

Sunflower oil 65.8%

Wheat 31.3%

Sugar 29.8%

Dairy products 16.9%

Meat 12.7%

Source: FAO

Source From: MK

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