The Global Food Crisis is Not Over Yet

A year since the war began, factors like climate change, fertiliser prices, uncertainty over the Black Sea grain deal continue to pose a threat to global food security.

It’s been a year since Russia invaded Ukraine. One of the several ways this has impacted the world is by increasing the cost of food. 

Last year, an already fragile global food security scenario was worsened by the uncertainty of crop shipments from Ukraine and Russia, both essential to the global food market. Food prices rose worldwide, primarily affecting the poorest countries and major grain importers, such as Lebanon and Egypt.

Since then, food prices have cooled somewhat. Why? Partly because of a reassuring deal that enabled shipments to leave Ukraine. But also because some of the increase was not based on demand and supply fundamentals but on speculation, as we have pointed out in the past. 

One would be tempted to think that the worst of the food security crisis is behind us and things will only improve from here. One would be wrong. 

The World Food Programme estimates that about 345 million could be food insecure in 2023, more than twice the number in 2020. 

So, what are the factors that threaten global food security in 2023? 

Climate change 

Can any piece of writing be considered complete anymore without the mention of climate change? 

A third consecutive year of drought in Argentina threatens the production of wheat, corn and soybeans – all of which are important exports out of Argentina. The worst drought to hit the horn of Africa in the last sixty years has already meant that many people in this region face the risk of famine.

Warm winter temperatures are once again threatening the wheat crop in India. This also happened last year when India’s wheat production fell by about 12 percent.

We are not into March yet, and temperatures in the wheat-growing regions of northwest India have already hit 30C. There is a genuine risk that if temperatures continue to be as high as this, the wheat crop could suffer damage again.

El Niño 

2022 was the fifth warmest year on record despite the La Niña effect cooling temperatures in the Pacific Ocean. Global temperatures fall by about 0.2C during a La Niña episode, which we have seen in play for the last three years. 

There is a high likelihood that La Niña will give way to the opposite phenomenon, the El Niño, which generally means global temperatures rise by about 0.2C. Scientists have said that it is pretty likely that the next El Niño takes the world beyond 1.5C of warming. 

El Niño can also impact food production around the world. The higher-than-normal temperatures, coupled with the impact of climate change, will pose a threat to crops. Parts of the world could also witness extreme rainfall leading to floods. At the same time, other regions are likely to see low rainfall that could bring droughts. 

Generally, El Niño events tend to lead to an increase in the prices of food. If that does happen this year, it will come on the back of an already severe cost of living crisis worldwide. It will also come at a time when developing countries around the world are struggling with a debt crisis. 

The Black Sea grain deal 

In the initial months of the war, the export of grains and oilseeds from Ukraine was halted. Only in July last year, a deal between Ukraine and Russia brokered by the United Nations allowed exports to be shipped through the Black Sea. That helped ease some of the pressure on global prices. 

That deal is set to expire on March 18, and there are concerns that its extensions will not be a straightforward affair. Failure to extend the agreement will mean that food exports from Ukraine are blocked again, possibly sending the commodities markets into a tizzy. 

Russia’s new offensive in Eastern Ukraine

Recent reports say Russia has begun a major new offensive in eastern Ukraine. Even though it's still early days, and it remains unclear if this will threaten the wheat crop in this part of Ukraine, wheat prices have already increased slightly on the news of the offensive. 

Market matches warn, “if the grain deal isn’t extended before it expires in March and supplies from the Black Sea are threatened, wheat prices have likely bottomed." 

Fertiliser costs

Prices of fertilisers have fallen from the lofty heights of April 2022. But they remain high compared to pre-war and pre-pandemic levels. 

For instance, the price of Urea remains more than twice as high as it was in January 2020. DAP also remains twice as expensive. 

The impact is felt by farmers, particularly in developing countries, who have to cut down on the amount of fertiliser applied to the crop. This could potentially have an impact on yield. 

In the scenario that the amount of fertiliser applied remains the same, the cost of the produce will increase. According to an IMF estimate, if fertiliser prices increase by 100 percent, food prices increase by 45 percent.