The price of everything, from wheat and sunflower to lemons, has been driven up by the pandemic and war in Ukraine.
The disruptions in the supply chain have been evident since the COVID-19 pandemic in 2020. However, these dislocations are made worse by the conflict between Russia and Ukraine. Both countries are major exporters of wheat. According to Mercy Corps, an aid organization that provides assistance to the poor worldwide, this has led to food inflation that is particularly damaging to the most vulnerable.
Tejada Daoyen McKenna (CEO of Mercy Corps) stated that skyrocketing food costs in 2022 have meant that cash assistance provided to vulnerable families doesn’t go as far. “The primary obstacle to accessing food is the decrease in purchasing power and increased food prices.
The United Nations and Turkey brokered an agreement last month that allowed Ukraine to resume grain exports from the Black Sea. This has provided some relief for global markets. The UN Food and Agriculture Organization Food Price Index, which tracks a basket of commonly traded commodities, fell for the fourth consecutive monthly month in July. It had previously reached a record in 2022.
However, consumers are unlikely to see the price drop immediately.
McKenna stated that while many food prices have fallen in recent weeks with some prices returning to prewar levels but markets will remain volatile. Even if global prices fall, local markets may not experience price adjustments for up to a year.
We could also see a new chapter of the food crisis, which could cause prices to rise again. Here are some ways the food crisis could turn around in 2023.
It’s a logistic problem this year. It could become a supply problem next year. The main reason for this year’s food shortage is a logistical problem related to shipping Russian and Ukrainian grains out of these countries. However, next year’s food supply could be at risk — especially in Ukraine.
The Russian invasion of Ukraine on February 24th, 2008, threw a wrench in the annual farm cycle. also disrupted the spring sowing season between April and May. A second sowing cycle is held in September and November.
Ukraine’s President Volodymyr Zilenskyy warned that this year’s crop harvest could be reduced by half due to war. Zelenskyy tweeted, “Ukrainian harvest this season is under threat to be twice as low.”
According to a report by McKinsey, a drop in harvest volumes was predicted in an August 17 report. It is estimated that Ukraine’s production, including wheat, would drop by 35%-45% during the next harvesting season.
“The ongoing conflict is interfering in farmers’ ability to prepare farms, plant seeds and protect and fertilize their crops, which will likely lead to even lower volumes next harvest season,” McKinsey stated in the report on global food security in light of the Ukraine war and the impact from climate change.
McKinsey predicts that Ukraine’s harvest this year will be between 30 and 44 million tons lower than normal. According to McKinsey, this is due to lower acreage plantings, decreased farmer cash flow because a large portion of their last harvest cannot be shipped, as well as the possibility that grain may not be tended to or harvested.
McKinsey wrote that “In the next growing season, due to war’s disruption in Ukrainian planting and harvesting, combined with less than optimal inputs into Russian and Brazilian crops, the supply will likely tighten,” McKinsey interviewed local growers, and reviewed data from the area for its report.
- A supply shock is exacerbated by rising fertilizer prices and climate changes
- Russia was responsible for nearly one- fifth 2021 fertilizer exports. However, the conflict in Ukraine has caused serious disruption to the supply and demand of crop nutrients. According to Bloomberg Green Markets service, urea prices have more than doubled since a year ago. The result is that farmers all over the globe are using less fertilizer.
- In 2023, the food crisis could get worse. A supply shortage will overtake logistical constraints and be the main challenge.
The Ukraine war has disrupted sowing activities and other farm activities, which has had an impact on yields. High prices have led to a decrease in fertilizer use by farmers, which could lead to lower harvests.
Fertilizer shortages, as well as higher fertilizer prices, are expected to decrease yields in countries like Brazil that heavily rely on fertilizer imports. McKinsey stated in his report that this will likely lead to a further decline in the global grain market.
