Insight Focus
- UN says Ukraine’s food supply chains are collapsing.
- Egypt and Algeria ban exports of basic foodstuffs.
- India mulls Russian offer of discounted commodities.
The shock to the global food supply chain from Russia’s invasion of Ukraine has spurred many countries into restricting or halting exports of key foodstuffs in the short term. Many are investigating how they can reduce their import dependence in the long term as well.
Meltdown Fears
Analysts have expressed fears that Ukraine might export little or no grain this season, The Independent said.
Russia and Ukraine account for almost 30% of global grain exports, and the UN World Food Programme sourced more than half of its supplies to feed the world’s hungry from Ukraine.
“We must do everything possible to avert a hurricane of hunger and a meltdown of the global food system,” UN Secretary General Antonio Guterres was quoted as saying by AFP.
The situation in Sudan is an illustration of what can happen when there’s an economic meltdown which hits food security.
More than half the country’s population will face hunger this year as the fallout from the war in Ukraine and October’s coup make it more difficult for Sudan to source food, Bloomberg reported, citing the UN’s World Food Programme (WFP).
The economic and political situation has led to riots across the country, Africanews reports. It also said that an almost 43% rise in the cost of bread had substantially added to public discontent.
Swiss Economics Minister, Guy Parmelin, cited concerns about food security in vulnerable countries when he expressed opposition to sanctions targeting commodity trading with Russia, the Swissinfo website reported. Around 80% of commodities from Russia are traded in Switzerland.
UN warns on Ukraine’s Supply Chain
In Ukraine itself, the WFP said supply chains were collapsing, with a portion of infrastructure destroyed and many grocery stores and warehouses now empty, Reuters reported.
Earlier, the Ukrainian government said it was confident there would be no shortages of staple foods in Ukraine because exports had been stopped by the war, meaning the country had large stocks of wheat, corn, sunflower oil and sugar, the official Ukrinform news agency reported, citing deputy agriculture minister Taras Vysotsky. Fertilizer exports have also been banned, Interfax-Ukraine added.
While the invasion has meant Ukraine cannot export, the Russian government has decided to restrict exports to maintain food security, the Interfax news agency reported. The agriculture ministry said it would suspend exports of wheat, rye, barley and corn from 15th March to 30th June to former Soviet Republics in the Eurasian Economic Union.
Later, Reuters quoted Deputy Prime Minister, Victoria Abramchenko, as saying the export of grain within the quota under individual licences would continue to be allowed.
The government is to allocate over 26 billion roubles (USD 247 million) to support key enterprises in the domestic agricultural sector, Interfax quoted Prime Minister Mikhail Mishustin as saying.
Abramchenko was quoted by Interfax as saying that Russia is opening up new markets for food imports and increasing cooperation with new suppliers such as Turkey, India, China, Belarus, Azerbaijan, Kyrgyzstan, and Kazakhstan in response to Western sanctions.
The Agriculture Ministry also gave an assurance that there would be no shortage of confectionery products, Interfax said.
However, Russia is dependent on the West for seed imports, and German crop science company, Bayer, said it had already provided essential agricultural inputs for 2022 but that their provision for 2023 would depend on “Russia stopping its unprovoked attacks on Ukraine and returning to a path of international diplomacy and peace”.
Export Bans
Despite pleas from the UN Secretary General and the G7 agriculture ministers, many countries with poor food security have restricted the export of staple foods. Egypt has imposed an export ban on cooking oil, corn, and all kinds of cracked green wheat for three months, the Al-Ahram news website reported. The move comes on top of an earlier three-month ban on the export of wheat, fava beans, lentils, pasta, and all kinds of flour.
As part of its contribution to food security, the Egyptian central bank suspended the 100% cash margin requirement imposed on most imports from imports of rice, beans and lentils for one year, the official Middle East News Agency reported.
Algeria too banned the export of imported staples such as sugar, pasta, vegetable oil, semolina and all wheat derivatives. The official APS news agency added that President Abdelmadjid Tebboune asked for a law to be drafted criminalising the export of products not made locally.
In Argentina, the government halted the registration of export sales of soy oil and meal, Reuters reported. The domestic industry slammed the move ahead of the harvest which is due to begin within weeks. Industry group, CIARA, accused the cash-strapped government wanting to raise tariffs “by two points” on exports. The US Department of Agriculture forecasts Argentina, the world’s largest exporter, will account for 41% of global soymeal and 48% of soy oil exports in the 2021-22 crop year.
Seeking Alternatives
Rising prices and disrupted supply chains have caused countries to look into boosting domestic production of key commodities.
Brazil launched a national fertilizer plan aimed at lowering its dependence on imports to 45% by 2050 from 85% now, Reuters reported.
The US is also looking to lower its fertiliser imports, with the Department of Agriculture saying it would make available USD 250 million through a new grant program this summer to support independent, innovative and sustainable domestic fertiliser production to supply US farmers.
The USDA added that it would launch a public inquiry into seeds and agricultural inputs, fertiliser, and retail markets to address growing competition concerns in the agricultural supply chain.
The world’s largest fertiliser producer, Canada-based Nutrien, says it plans to raise its potash production by around 1m tonnes this year to about 15m tonnes in response to the uncertainty of supply from Russia and Belarus. The two countries are the world’s second and third largest producers after Canada.
Reaping Benefits
India is keen to take advantage of sanctions-hit Russia’s need to export commodities. Reuters cited two government officials as saying. “Russia is offering oil and other commodities at a heavy discount. We will be happy to take that,” one of the Indian government officials said. The Financial Times (behind paywall) said India’s central bank was holding initial consultations on a rupee-rouble trade arrangement with Moscow that would enable exports to and from Russia to continue after western sanctions restricted international payment mechanisms.
However, India may be able to reduce its dependence on imported oil. Minister for Road and Highways, Nitin Gadkar, said automotive companies would start manufacturing flex-fuel variants within six months and that soon most vehicles in India will run on 100% ethanol, the NewsOnAir website reported.
If this were to be realised, it would help India deal with its domestic sugar surplus. Indian sugar exports are expected to rise 400k tonnes on the year to 7.5m tonnes in the 2021/22 season (October-September), Indian Sugar Mills Association Director General Abinash Verma was quoted as saying by Reuters.
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