Blocked food shipments in the Black Sea cause hunger and food poverty on the other side of the world.
Volatile international prices for food have been another consequence of the war, with far-reaching geostrategic implications – so much so that the World Economic Forum’s 2023 Global Risks Report ranked a food supply crisis as one of the main threats facing the world.
Prior to the invasion, Ukraine was an important cog in the global food system, accounting for 10 per cent of global wheat exports, 13 per cent of barley exports, 15 per cent of corn exports, and more than 50 per cent of the global market for sunflower oil. Ninety-five per cent of Ukrainian grain exports were transported by sea from Ukraine’s Black Sea ports, including Kherson, Mariupol and Odesa – all of which have been blockaded or occupied by Russian forces.
Ukraine’s grain production and exports dropped by 25 per cent and 15 per cent respectively in 2022, compared with 2021. Interruption to the flow of exports from the Black Sea, as well as the progressively tightened international sanctions on Russia (itself a major exporter of foodstuffs and fertilizer), led to dramatic rises in global food prices. Prices were rising before the war, but have jumped since February 2022 – eroding living standards and increasing poverty around
the world.
Disruptions to Ukraine’s food exports mean increased poverty and deprivation in other parts of the world, especially in countries such as Bangladesh and Egypt, which in 2021 sourced around one-quarter of their wheat supplies from Ukraine. Around the world, an estimated additional 47 million people were acutely hungry in 2022 due to the ripple effects of the war.
Around the world, an estimated additional 47 million people were acutely hungry in 2022 due to the ripple effects of the war in Ukraine.
In 2022–23, world cereals production decreased by an estimated 0.9 per cent, compared with 2021–22. This may seem modest, but on average a 1 per cent drop in global harvests raises food commodity prices by 8.5 per cent. In the case of Ukraine, market panic, opportunistic speculation and a wave of reactive export restrictions pushed prices higher still. The average price of wheat, for example, leapt by 165 per cent between May 2021 and May 2022.
Another factor in global price rises is the price of fertilizers, which are key for agricultural yields, but also an important input cost for farmers. As with other commodities, the global price of fertilizers was high at the time of the invasion, due to tight markets and high energy costs arising from COVID-19-related restrictions being lifted. The war then rapidly accelerated the upward trend, both due to resultant higher energy prices and sanctions against Russia (Russia is also a key manufacturer of many fertilizers).
The sanctions imposed on Russia and Belarus by the US, the EU, Canada and others exempted agricultural products, but nevertheless affected global fertilizer trade, since many importers choose not to purchase from the two sanctioned countries. Shortages were compounded by export restrictions in China, which accounts for 30 per cent of global phosphate fertilizer supplies. At the same time – illustrating the compound effects of the war – high energy prices led to a 70 per cent drop in European fertilizer production, further limiting supplies.
Fertilizer prices have eased compared with their early 2022 peaks but remain at historically high levels. Pre-war, prices were around $200–300 a tonne, peaking at over $800 a tonne. They are now closer to $600 a tonne. This price easing partly reflects weak demand as farmers cut fertilizer field applications due to affordability and availability issues. On average, a 1 per cent increase in fertilizer prices causes food commodity prices to rise by 0.45 per cent.
The Black Sea grain deal, negotiated by Turkey in July 2022, allowed for exports of Ukrainian and Russian food and fertilizers. By May 2023, over 30 million tonnes of grain and other foodstuffs had been exported under the initiative. Over 50 per cent of that cargo was maize, which was the grain most affected by blockages in Ukrainian granaries at the beginning of the war (accounting for 75 per cent of the 20 million tonnes of grain stored).
Russia increased its wheat exports in 2022, with volumes expected to have risen by 15 per cent due to the widespread theft of Ukrainian grain in occupied areas and the signing of the grain corridor agreement, which also helped to open some Ukrainian ports and stabilized the global food system. While the level of exports to some countries fell (notably to Iran and Turkey), those to others such as Egypt and countries in Latin America increased. Russian officials expect export volumes to grow further in 2023, as their figures will include the harvest from the occupied areas in Ukraine.
In May 2023, the Black Sea grain deal was extended for a further 60 days. But in mid-July 2023, Russia pulled out of the deal, complaining that its terms had not been met. This led to an immediate surge in wheat, corn and soybean prices. Around the same time, Russia started a concerted series of aerial attacks on grain export infrastructure in Black Sea port cities that senior UN officials condemned as potentially life-threatening to the millions of people around the world who need access to affordable food. The ongoing uncertainty over how much grain will be exported, and efforts by Russia to use food as a lever of political influence, mean that global food prices are likely to remain volatile in the medium term, particularly in the context of the El Niño weather system that is likely to constrain global food production in 2023–24.
Ongoing uncertainty over how much grain will be exported, and efforts by Russia to use food as a lever of political influence, mean that global food prices are likely to remain volatile in the medium term.
Volatility in global food commodity prices is also straining the ability of the global humanitarian system to help those in need. In 2021, the World Food Programme (WFP), which feeds millions of people worldwide every day, bought 40 per cent of its grain from Ukraine. One year after Russia’s invasion, WFP’s monthly operating costs were running at $73.6 million – 44 per cent higher than in 2019 – primarily as a result of the increased prices of providing fuel and food aid. Inflation in food costs, coupled with the breadth of the cost-of-living crisis, impacts globally on the economically marginalized. In the UK, for example, food price inflation reached more than 19 per cent in April 2023, contributing to significant rises in food poverty and use of food banks.
Continued uncertainty over both how much Ukrainian land can be planted and harvested in 2023 and who will control any crops that are harvested – coupled with high fertilizer prices and the collapse of the grain deal – means that these high and volatile global food prices are likely to persist. This will have serious consequences for poor countries that rely heavily on food imports. The International Monetary Fund (IMF) assessed the impact of higher food and fertilizer prices on the balance-of-payments situation of the 48 countries most affected (including Ukraine), calculating that the price rises are costing those countries $9 billion more than would have been the case without the war – eroding their foreign reserves and limiting their ability to pay for food imports. Quite apart from the impacts on nutrition and poverty, the negative effects on national finances could provoke protests and unrest in some countries, given the strong correlation between food price spikes and social instability.
