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Food prices are rising in light of war and climate change


The supply crisis is among the greatest threats facing the world

The world is currently facing a massive food crisis that some have described as the worst since World War II. The International Food Policy Research Institute warns that food prices will continue to rise this year, unless there is significant debt relief and support from the international community.

As the Russian war in Ukraine enters its second year, fears are renewed about the fate of the grain basket in the Black Sea region, which has become hostage to political and security tensions. Meanwhile, severe weather conditions in India, Pakistan, Argentina, East Africa and Europe are contributing to a decline in global food supplies and an increase in prices.

War threatens global food security

The latest World Bank food security brief points to uncertainty surrounding agricultural markets as the war in Ukraine continues. The report, which was issued in mid-March 2023, confirms the continued inflation in domestic food prices, with an increase in prices of more than 5 percent during the period between November 2022 and February 2023 in all countries. particularly in Africa, North and Latin America, South Asia, Europe and Central Asia.

According to the summary, Zimbabwe leads the food price inflation index during the period between October 2022 and January 2023, with an increase of 264 percent, while Lebanon ranked second in the world, with an increase in food prices of 139 percent. Argentina ranks third (99 percent), Iran (73 percent) and Turkey (67 percent). In the event that general inflation is excluded, the real increase in food prices in Zimbabwe remains the highest in the world, followed by price increases in Rwanda and then Egypt. Iran, Lebanon and Turkey continue to be among the ten worst countries in the world in terms of real food price increases.

And last February witnessed a decline in corn prices by 10 percent, and in wheat prices by 20 percent, thanks to Russian wheat exports that exceeded expectations, as well as thanks to the grain export corridor agreement that allowed the transportation of 3 million tons of grain per month through the ports of Ukraine on the Black Sea.

Bumper harvests in Australia and Canada also helped offset a sharp drop in Ukrainian wheat shipments, a surge in maize production in Brazil offset the impact of lower Ukrainian supplies, and the United States harvest stabilized the forage market, as the world’s number one exporter of forage grains such as maize and millet. And barley and oats.

As a result, the world price index of the Food and Agriculture Organization (FAO) decreased in February by 19 percent, compared to the record price level achieved by the index in March 2022, but prices are likely to remain volatile. This year, particularly during the sowing and growing stages of major crops, global grain stocks remain lower than normal.

The World Bank warns that global food prices, while lower than the record highs reached a year ago, are still high, and that new export restrictions could push prices up again. Since December 2022, 19 countries have imposed a ban on food exports, and 8 countries have placed restrictions on exports.

The war in Ukraine controls more than a third of the global wheat trade, 17 percent of the global corn trade, and nearly 75 percent of the global sunflower trade. Its influence extends to agricultural production requirements, as Russia, along with Belarus, is one of the largest sources of mineral fertilizers in the world. Although there are specific exceptions in the sanctions regime that allow the two countries to continue exporting fertilizers, these exports still face other measures that impede their flow.

The Global Risks Report 2023, issued by the World Economic Forum, ranks the looming food supply crisis as one of the top 4 threats facing the world. The report expects that the future effects of the rise in fertilizer prices will affect food production this year, knowing that half of the world’s population depends on food produced using mineral fertilizers, according to estimates by the Food and Agriculture Organization (FAO).

The lack of fertilizers in the global market is exacerbated by the export restrictions imposed by China, knowing that it alone provides 30 percent of the global phosphate fertilizer supply, and the World Bank estimates that China’s fertilizer exports will decrease by 50 percent in 2022 as a result of measures to protect the domestic market. . Meanwhile, rising energy prices as a result of the war in Ukraine led to a 70 percent drop in European fertilizer production, exacerbating global supply shortages.

Decreased food supply due to climate change

Weather conditions and their prolonged effects, particularly floods and droughts, play a major role in food shortages and price increases. The direct economic impact of drought on the agricultural sector is represented by reduced crops and loss of pastures, and the burden of drought is often passed on to consumers through increased prices, unless losses are compensated through government assistance programs in cases of disaster.

Indirect effects of drought in this sector could include reduced supplies to manufacturing industries, such as the food industry, and reduced demand for inputs, including fertilizers and agricultural labour. The non-market effects of drought include psychological pressures on farmers that may push them to change their source of livelihood.

And data from the US Department of Agriculture show that despite the positive indications that Brazil achieved a large crop of corn this year, amounting to 125 million tons, Argentina’s production (the third largest exporter of corn in the world) will decline to the lowest level in 5 years, due to the worst drought the country has faced in 60 years. .

In September 2022, India banned exports of broken rice, which is mainly used as animal feed, and imposed a 20 percent tariff on exports of other varieties of rice to support domestic supplies and prices, after low rainfall in the main production areas.

India and South Asian countries are facing an increase in the frequency of severe weather events; From extreme heat waves or severe floods. The region is considered one of the most vulnerable regions in the world to the effects of climate change, and at the same time it is one of the most important sources of rice and cotton globally. Floods in India and Pakistan, along with drought in Europe, have reduced onion production and recently raised its prices to many times the usual levels.

Faced with the lack of agricultural production due to the drought, European countries banned the export of onions, vegetables and other fruits, such as carrots, tomatoes, potatoes and apples. These measures negatively affected the United Kingdom, which faced an acute shortage of vegetables, prompting markets to ration the sale of tomatoes, cucumbers, and other salad ingredients.

The impact of the global food supply crisis can be mitigated through several measures, including calling on exporters to refrain from stockpiling, and to abolish policies to ban, tax, or otherwise restrict exports. Importers must reduce or eliminate tariffs and other taxes on imports to ensure an adequate supply at all times. It is also necessary for better cooperation of international organizations to provide immediate information on foreign policy changes and their effects on world production and trade.

Enhancing food security in every country requires taking impactful initiatives to support farmers and their production. The proposed measures include removing barriers to trade in agricultural production inputs, such as seeds, fertilizers, pesticides and fodder, increasing the efficiency of fertilizer use, reformulating policies, and mobilizing government resources to increase production.

Ensuring food security requires making fragile food systems more resilient to trade speculation, economic shocks, disruptions from conflict, climate change, diseases and pests. This entails balancing short-term needs with long-term investments, to ensure a secure food future for all.