- By Jamie Shea
A few weeks back, the Governor of the Bank of England, Andrew Bailey, gave his periodic tour d’horizon of challenges to the international system at a hearing of a House of Commons select committee. He zeroed in on the mounting global food crisis, describing it as potentially apocalyptic. This designation drew him a certain amount of rebuke from the UK press, accusing the Governor of exaggeration and doom-mongering. Yet in recent days the Governor’s warnings have been borne out by the statements of several other senior international figures, all warning of an impending food catastrophe.
At the World Economic Forum in Davos, the Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva, pointed to the toxic mix of rising food and energy prices, coupled with rising indebtedness that was already pushing 12 countries into economic collapse and political violence. Sri Lanka, which has run out of financial reserves to pay for its imports, is the most graphic example. Addressing the United Nations Security Council last week, the Executive Director of the UN World Food Programme, David Beasley, outlined the scope of the challenge. Currently, 1.6bn people are suffering from food stress, which means that they do not eat every day or fall short of the minimum daily calorie intake to maintain a healthy existence. This number has gone up by a staggering 440mn additional human beings over the last two years. An additional 49mn has been added to the 276mn facing famine in the same time frame, and 49mn people in 43 countries are on the brink of starvation. In East Africa, where prolonged drought has decimated agriculture and livestock, someone dies from starvation every 48 seconds.
Hunger has always been an issue somewhere on the planet at any one time. Why is the food crisis now reaching global proportions?
Before the war, Ukraine was exporting 5mn tonnes of grain every month, but this figure has now fallen to just 1.5mn tonnes
In the first place, the war in Ukraine has instigated a chain of consequences. The rich, black soils of Ukraine are famous for their productivity. Before Russia invaded, Ukraine’s exports of wheat and maize were supplying calories to 440mn people, especially in North Africa and the Middle East. Together with Russia, Ukraine’s grain exports make up 28% of the global total – or 12% of all traded calories. This figure rises to 80% for sunflower oil, which is used for cooking throughout Africa and the Middle East. Russia and Ukraine are the principal grain exporters to 50 countries.
Before the war, Ukraine was exporting 5mn tonnes of grain every month, but this figure has now fallen to just 1.5mn tonnes. Ukraine’s storage silos contain 25mn tonnes of wheat and maize; however, Ukraine cannot export this grain as Russia is blockading its Black Sea ports. Vital port infrastructure and road and rail links have been damaged by Russian bombardments. Ukraine has also mined its harbours to defend against Russian amphibious landings. After some commercial vessels were hit by mines, and reports surfaced that mines were floating freely in the Black Sea, international shipowners were reluctant to send their vessels into the Black Sea to collect grain even if the principal port for exports, Odessa, remains in Ukrainian hands.
Yet the problem extends further. The Russian forces are reported to be confiscating grain stocks in areas under their control or destroying crops altogether. Tractors and farm equipment have been carted off to Chechnya, according to some reports, and many farms have been destroyed or damaged. With farmers and farm hands leaving to join the armed forces, the spring planting season is being disrupted and Ukraine’s harvest will inevitably be smaller than in previous years. According to Ukraine’s Agriculture Ministry, the shortfall could be anything between 30% and 50%.
Russia’s food exports are not subject to international sanctions and Russia is the world’s largest exporter of wheat. Yet, sanctions on shipping, difficulties to obtain insurance, financing restrictions and sanctions on certain imports, as well as Turkey’s restrictions on passage through the Black Sea straights, are making it harder for Russia to get its grain to its traditional markets. Russia needs to import seeds and fertiliser too. United States Secretary of State Antony Blinken has accused Russia of ‘weaponising’ grain in its war against Ukraine in an attempt to blame the food crisis on the international sanctions rather than on Russia’s military actions.
As a result, developing countries can quickly become trapped in a vicious cycle of rising prices, shortages and social unrest
Yet it is often the case that a crisis is caused not by one single event or factor but by the interplay of several factors, all coming together at precisely the worst moment. This seems to be the case with food supplies.
Shutdowns caused by the two-year COVID-19 pandemic have led to disruptions to trade, supply chains and market mechanisms. Developing countries that import most of their food have seen their foreign currency reserves slashed by the collapse in tourism and rapidly rising energy prices. Farmers can no longer afford fertilisers and nitrates made from gas and oil or pesticides. Domestic production has gone down at precisely the moment when grain prices on international markets are shooting up. Some developing countries can switch to rice but where the staple diet is bread, as it is the case in Egypt, the world’s largest grain importer, governments come under pressure to increase subsidies to stave off social unrest.
Yet this role of governments to buy food for their populations through subsidies is being undercut by rapidly depreciating currencies and financial reserves in places such as Egypt and Turkey. Egypt saw its hard currency reserves drop by 10% to just $37bn from February to March alone and the Egyptian pound depreciated by 14%. The response is to raise interest rates, but this makes it harder for farmers to access credit and increase production. As a result, developing countries can quickly become trapped in a vicious cycle of rising prices, shortages and social unrest. The World Bank estimates that the war in Ukraine will knock 1% off the GDP of the poorer countries this year.
Europe is also facing too little rain at just the moment when dryness could have the biggest negative impact on wheat production
Climate change is also now having a major and global impact on food production. Back in February, India promised to feed the world, but it then experienced its hottest March on record and worried that a poor harvest would compromise its ability to feed its own population. So Delhi announced a ban on grain exports. In total, no fewer than 26 countries have announced similar bans or restrictions on exports too as they revise their production estimates sharply downwards; this equates to 15% of the annual global consumption of calories. Extremely hot summers are now impacting many of the world’s breadbaskets. China has warned that after severe floods last year, its wheat crop could be one of the worst ever.
Due to severe drought experienced throughout the grain belt in the US, 40% of this year’s wheat has been deemed of poor quality, twice the average of 20%. Overall, production of winter wheat will be down by 21% this year compared to 2021, according to estimates. Europe is also facing too little rain at just the moment when dryness could have the biggest negative impact on wheat production. Climate change affects the pattern of the seasons and traditional planting, irrigation and harvesting times. Farmers are still working out how to adapt their production cycles and techniques to minimise disruptions, but as we have seen this year in Europe, earlier seeding can be undermined by a couple of late and unusually harsh early spring frosts. The problem is here to stay. The UK’s Met Office says that heatwaves are now 100 times more likely than a century ago, and gulf stream patterns provoked by El Niño and La Niña are interacting in less predictable ways. In a tightening grain market, an extreme weather event somewhere can tip the supply crisis over the edge.
So, what needs to be done to get a grip on the food crisis now before we face not only a humanitarian catastrophe but widespread political and economic dislocation across Africa, Asia, the Middle East and Latin America?
This is the ideal time for Beijing to win some much-needed international goodwill and demonstrate its capacity for global leadership by releasing at least 50mn tonnes of its stocks onto global markets
Firstly, grain currently lying in silos should be exported to market. Ukraine is the place to begin. The UN Secretary General, Antonio Guterres, is trying to mediate between Moscow and Kyiv to get commercial shipping in the Black Sea moving again. Humanitarian shipping corridors have been proposed. Lithuania has suggested a convoy system whereby Western warships, although not under a NATO flag, would escort grain vessels from Odessa to the Mediterranean. This would help them avoid mines and prompt Russia to desist from hostile military activities or interference, such as inspections or delay manoeuvres.
It is far from certain that Putin will be minded to accept such an arrangement that would boost the Ukrainian economy as much as relieve world hunger; but the pressure is mounting on him and a refusal to cooperate at all might lose him some support from the fence sitters in India, South Africa, Brazil, the Gulf states, and some African and Latin America states. Much of the Ukrainian grain goes to countries like Egypt that Russia is trying to cultivate. The EU needs to try other routes too, like using the Danube where grain barges are lying idle or allowing more Ukrainian trucks filled with grain onto EU highways without the quota limits or complex and time-consuming sanitary inspections or customs duties and paperwork that hold up the traffic at EU borders. These will not be perfect solutions but they will be better than nothing.
Another way forward is to try to get normal market mechanisms back up and running. Four-fifths of the global population live in countries that need to import food. That food has often to cross at least one international border to reach its destination. So, bodies like the G7 and the G20, as well as the financing institutions such as the World Bank, the IMF and the regional banks, need to prevail on the grain hoarders to uphold export contracts and release grain onto markets. It is encouraging that India has had a small change of heart by shipping half a million tonnes to Egypt. China is the world’s largest grain hoarder, and this is the ideal time for Beijing to win some much-needed international goodwill and demonstrate its capacity for global leadership by releasing at least 50mn tonnes of its stocks onto global markets, notwithstanding its own domestic needs after the floods.
Debt forgiveness for the most impacted countries will no doubt need to be part of the policy mix too, along with some painful IMF-driven restructuring programmes. The debt forgiven can be converted into immediate food aid and food purchases on credit, along with long-term reforms of subsidies and the agriculture sector. It is important in this respect that UN appeals for donations be used for immediate famine relief in the most severely stricken areas, such as East Africa, Ethiopia’s Tigray province and Afghanistan.
13% of all grain production is used to feed livestock, such as cattle or pigs, so switching to a plant-based diet and giving up meat is certainly a good way of eating to avoid hunger for the human race and not merely individual consumers
Finally, we will need to take a serious look at substitutions for grain used for things other than human consumption, notably animal feed and biofuels. In 2021, China imported a staggering 28mn tonnes of grain just to feed its pigs. The UN estimates that 13% of all grain production is used to feed livestock, such as cattle or pigs, so switching to a plant-based diet and giving up meat is certainly a good way of eating to avoid hunger for the human race and not merely individual consumers. A further 10% of grain production goes on biofuels. The UN further estimates that if all the grain devoted to feeding livestock and producing biofuels were redirected to human consumption, 1.9bn people could be fed. Some countries have laws mandating a certain volume of biofuel production as part of the greening of their economies.
There are difficult choices and trade-offs to be made here between competing priorities. Avoiding global famine and saving lives must come first over food diversity and lifestyle choices, and we will need to find other green fuels if biofuels become too costly or consequential. In the EU, Finland and Croatia have already relaxed national mandates on biofuel production to spare grain, and that is an example that other EU countries should be encouraged to follow.
No more than most other global catastrophes, the impending famine crisis is not inevitable. Food production has been going up overall due to better seeds, water use, genetic engineering for greater resilience and the application of science and technology to crop yields. There is enough food to feed the planet, notwithstanding the recent shocks from extreme weather events and conflicts. Yet, as so often happens, the food is with the haves rather than the have-nots, and food retailers and processing companies in many parts of the world have been making healthy profits during COVID-19 related lockdowns while many regions start to go hungry. The task now is to move the food to where it is most urgently needed – and there is not a day to be lost.
- Eye on the Geopolitical Ball
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