THE RUSSIA-UKRAINE CONFLICT & GLOBAL FOOD SECURITY EDITED BY JOSEPH GLAUBER & DAVID LABORDE Copyright © 2023 International Food Policy Research Institute (IFPRI). This publication is licensed for use under a Creative Commons Attribution 4.0 International License (CC BY 4.0). Subject to attribution, you are free to share (copy and redistribute the material in any medium or format), adapt (remix, transform, and build upon the material) for any purpose, even commercially. Third-party content: The International Food Policy Research Institute does not necessarily own each component of the content contained within the work. The International Food Policy Research Institute therefore does not warrant that the use of any third-party-owned individual component or part contained in the work will not infringe on the rights of those third parties. The risk of claims resulting from such infringement rests solely with you. If you wish to re-use a component of the work, it is your responsibility to determine whether permission is needed for that re-use and to obtain permission from the copyright owner. Examples of components can include, but are not limited to, tables, figures, or images. This book has not been peer reviewed. Any opinions stated herein are those of the author(s) and are not necessarily representative of or endorsed by the International Food Policy Research Institute (IFPRI). The boundaries, names, and designations used in this publication do not imply official endorsement or acceptance by the authors, IFPRI, or its partners and donors. Recommended Citation: Glauber, J., and D. Laborde, eds. 2023. The Russia-Ukraine Conflict and Global Food Security. Washington, DC: International Food Policy Research Institute. International Food Policy Research Institute 1201 Eye Street, NW Washington, DC 20005-3915 USA www.ifpri.org ISBN: 978-0-89629-439-4 DOI: https://doi.org/10.2499/9780896294394 Photo credits Cover: Leah Millis / Reuters. Chapter images: Pg. 13, Homes for heroes, Shutterstock.com. Design and layout: Lee Dixon Project manager: Pamela Stedman-Edwards https://creativecommons.org/licenses/by/4.0/ https://creativecommons.org/licenses/by/4.0/ http://www.ifpri.org https://doi.org/10.2499/9780896294394 TABLE OF CONTENTS ACKNOWLEDGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .iii FOREWORD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 SECTION 1: A Conflict with Global Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 How will Russia’s invasion of Ukraine affect global food security? . . . . . . . . . . . . . . . . . . . . . . . . . 10 A food crisis was brewing even before the Ukraine war — but taking these three steps could help the most vulnerable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 The Russia-Ukraine war’s impact on global food markets: A historical perspective . . . . . . . . . . 18 The Russia-Ukraine war is exacerbating international food price volatility . . . . . . . . . . . . . . . . . 24 No end in sight yet for the global food price crisis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 The impact of the Ukraine crisis on the global vegetable oil market . . . . . . . . . . . . . . . . . . . . . . 33 High fertilizer prices contribute to rising global food security concerns . . . . . . . . . . . . . . . . . . . 38 The Russia-Ukraine war after a year: Impacts on fertilizer production,prices, and trade flows . 43 Is food price inflation really subsiding? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Assessing tight global wheat stocks and their role in price volatility . . . . . . . . . . . . . . . . . . . . . . 52 Ukraine one year later: Impacts on global food security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 SECTION 2: Policy Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Do no harm: Measured policy responses are key to addressing food security impacts of the Ukraine crisis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Short-term policy considerations to respond to Russia-Ukraine crisis disruptions in fertilizer availability and affordability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 The response to the global food crisis must address the needs of women and girls . . . . . . . . 75 The global food price crisis threatens to cause a global nutrition crisis: New evidence from 1.27 million young children on the effects of inflation . . . . . . . . . . . . . . . . . . . . . 77 MC12: How to make the WTO relevant in the middle of a food price crisis . . . . . . . . . . . . . . . . 81 Can the G7 be a force for good in the current global food security crisis? . . . . . . . . . . . . . . . . . 86 SECTION 3: Trade Policy Responses and Mitigation Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 From bad to worse: How Russia-Ukraine war-related export restrictions exacerbate global food insecurity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 Food export restrictions have eased as the Russia-Ukraine war continues, but concerns remain for key commodities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 The Russia-Ukraine grain agreement: What is at stake? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103 i Suspension of the Black Sea Grain Initiative: What has the deal achieved, and what happens now? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 How sanctions on Russia and Belarus are impacting exports of agricultural products and fertilizer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112 SECTION 4: Country Impacts and Responses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .119 Ukraine Regional war, global consequences: Mounting damages to Ukraine’s agriculture and growing challenges for global food security . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120 Middle East and North Africa The Russia-Ukraine crisis poses a serious food security threat for Egypt . . . . . . . . . . . . . . . . . . 125 Food price shocks and diets among poor households in Egypt . . . . . . . . . . . . . . . . . . . . . . . . . 129 One of the world’s worst economic collapses, now compounded by the Ukraine crisis: What’s next for Lebanon? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135 The Russian invasion of Ukraine threatens to further exacerbate the food insecurity emergency in Yemen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140 Addressing the food crisis in Yemen: The private sector’s key role amid local conflict and global market disruptions from the Russia-Ukraine war . . . . . . . . . . . . . . . . . . . . . 145 Sub-Saharan Africa West Africa faces mixed food security impacts from the Russia-Ukraine conflict . . . . . . . . . . . 150 The Russia-Ukraine conflict is likely to compound Sudan’s existing food security problems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154 Russia’s invasion of Ukraine threatens food security in Malawi. How can the country respond? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158 The Russia-Ukraine crisis presents threats to Nigeria’s food security, but potential opportunities for the fertilizer, energy sectors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164 Rising commodities prices driven by the Russia-Ukraine crisis threaten to undermine Kenya’s economy, increase poverty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170 Asia How the war in Ukraine threatens Bangladesh’s food security . . . . . . . . . . . . . . . . . . . . . . . . . . . 175 Latin America Can agricultural exports from Southern Cone countries make up for global supply disruptions arising from the Russia-Ukraine war? . . . . . . . . . . . . . . . . . . . . . . . . . 181 ii iii Acknowledgments The research undertaken for much of this e-book was supported by grants from the United Kingdom’s Foreign, Commonwealth and Development Office (FCDO) and the United States Agency for International Development (USAID). We thank all the IFPRI authors and external collaborators for their contributions and IFPRI’s Communications & Public Affairs Unit for its support to this body of work. The authors and collaborators are also thankful for research and data inputs provided by IFPRI’s Food Security Portal, a knowledge platform supported with funding of the European Union (EU). iv Foreword The Russian invasion of Ukraine in February 2022 created an immediate shock to global markets. Prices for cereals and vegetable oils rose rapidly in expectation of disruptions to Ukraine’s harvests and to shipping through the Black Sea. The war exacerbated existing economic fragility and food insecurity caused by climate change, conflict, and COVID-19, and the reaction of the international community to spikes in fuel and fertilizer prices led to additional impacts on agricultural markets. For many countries, a serious food crisis seemed likely. In the face of this sudden shock, policymakers needed information and guidance. IFPRI, with support provided by USAID and FCDO, stepped up immediately with analysis of global markets and country-level analysis, pro- viding both a picture of how this crisis would play out and how (and how not) to address the threat of growing food insecurity and rising prices. This work has drawn on IFPRI’s many years of research as well as its strong presence in many developing regions. Most importantly, IFPRI strove to get this information to stakeholders who were trying to make sense of the myriad implications of the Russia-Ukraine conflict — policymakers, the press, funding organizations, NGOs, and others. This book compiles 35 blogposts written over the past year — beginning the very day of the invasion — on Food and Fertilizer Price Trends. These posts, featured on IFPRI’s webpage on the food price crisis, have garnered almost 180,000 unique page views, including at least 7 that have been viewed more than 7,000 times and one that has been viewed over 39,000 times. IFPRI also hosted 7 policy seminars between July and October, bringing together experts and researchers to discuss the impact of the crisis and explore responses, which attracted close to 8,000 live views and continue to be viewed or listened to as podcasts. IFPRI also released a set of 20 publications based on modeling of the crises impacts and potential context-ap- propriate policy responses in a range of developing countries, which have already been downloaded more than 2,500 times. In addition, IFPRI has developed a number of tools to help practitioners navigate the food crises, including a Food and Fertilizer Export Restrictions Tracker, an Excessive Food Price Variability Early Warning System, and a Fertilizer Dashboard. The Food Security Portal, which hosts these tools and provides access to other data on food systems, was viewed more than 33,000 times in 2022. The success in communicating this work is most evident in the media attention it has received. IFPRI’s work on the food price crisis has been cited in top newspapers, magazines, and web-based news sources, including more than five mentions in The Washington Post, Financial Times, CNBC, Bloomberg, Wall Street Journal, New York Times, Yahoo, and the Economist, as well as mentions in The Conversation, Associated Press, Reuters, Al- lAfrica, The Business Standard (Bangladesh), Dhaka Tribune, The Hindu (India), Voice of America, Los Angeles Times, and Devex, as well as thousands of reposts. This book brings together IFPRI’s blogposts about the Ukraine crisis, written by IFPRI researchers and their colleagues. They cover the broad range of impacts and policy responses to the crisis. It is our hope that these will continue to inform the management of the present crisis and of future crises that disrupt our food systems. Charlotte Watts Chief Scientific Adviser and Director for Research and Evidence, United Kingdom Foreign, Commonwealth & Development Office Robert Bertram Chief Scientist, Bureau for Resilience and Food Security, United States Agency for International Development Johan Swinnen Director General, IFPRI, and Managing Director, Systems Transformation Science Group, CGIAR https://www.ifpri.org/spotlight/food-fertilizers-and-nutrition-rising-prices-and-global-food-security https://www.ifpri.org/spotlight/food-fertilizers-and-nutrition-rising-prices-and-global-food-security https://agrilinks.org/activities/ifpri-analyses-country-level-impacts-high-food-fuel-and-fertilizer-prices https://public.tableau.com/app/profile/laborde6680/viz/ExportRestrictionsTracker/FoodExportRestrictionsTracker https://www.foodsecurityportal.org/tools/excessive-food-price-variability-early-warning-system https://public.tableau.com/app/profile/laborde6680/viz/Fertilizer_Dashboard/FertilizerDashboard https://www.foodsecurityportal.org/tools/excessive-food-price-variability-early-warning-system INTRODUCTION When Russia invaded Ukraine in February 2022, the conflict quickly sparked fears of a global food crisis. Food prices were already high in the wake of the COVID-19 pandemic, and many countries were facing serious food insecurity. The Black Sea region is critical to meeting the world’s food needs, as is Russia’s role in supplying natural gas and, along with Belarus, fertilizers. Any disruption to this trade would drive up food prices and aggravate poverty, hunger, and malnutrition in vulnerable countries. With other countries undertaking export restrictions, these trade disruptions became even larger. The conflict has primarily affect- ed food systems through effects on trade in cereals and vegetable oils, interruptions to fertilizer exports, and rising energy prices, although a drop in agricultural production in Ukraine is also a significant factor. Together, these impacts could drive millions more people into hunger and poverty. Early in the crisis, the FAO estimated that a prolonged disruption of exports from Ukraine and Russia could increase the number of undernourished people by 8 to 13 million in 2022. IFPRI responded rapidly to the need for information and policy advice to address this new crisis. We signaled the worrying outlook for some agricultural commodities prior to the onset of conflict, and our first analysis on potential impacts was released on February 24, the day of the invasion. Mindful of the urgent need for analysis, IFPRI established a new blog series on High Food and Fertilizer Prices and War in Ukraine. This series, which was supported by a set of online trackers and dashboards providing access to detailed information, allowed for rapid dissemination of critical information and was widely shared through our website and communications with policymakers and media outlets. IFPRI’s strong presence at the country level allowed researchers to pro- vide important insights into the conflict’s impact on vulnerable countries and regions. The blog posts include timely analysis of trade flows, tracking of food prices and policy responses, and results of impact modeling for vulnerable countries, which were more fully examined in a series of briefs. This book is a compilation of those blog posts. Together, they provide an overview of how the crisis has pro- gressed, how the international community and individual countries responded with efforts to ensure food security, and what we are learning about the best ways to ensure food security in the aftermath of a major shock to global food systems. These blog posts each reflect a moment in time — the Russia-Ukraine war and its global repercussions have continued to evolve, especially since the earliest posts were written. Thus, they provide a vivid set of “snapshots” that can help us understand and learn from this crisis. As of this writing, international prices have declined from their post-invasion highs, but as the crisis continues to unfold, further volatility seems almost certain. Moreover, compounding factors have exacerbated inflation around the world. Given that the total supply of both food and fertilizers may be enough for all of humanity, the crisis remains one of affordability rather than availability. Role of Russia and Ukraine in global markets Russia and Ukraine both play a key role in world food markets, so any disruption in the region has global implications. In recent decades, the Black Sea region has become a major supplier of grains, oilseeds, and vegetable oil. Prior to the conflict, Russia and Ukraine accounted for 12% of total calories traded in the world and 30% of global wheat and barley exports. They were among the top five global exporters of wheat, barley, sunflower seeds, and maize. In addition, Ukraine supplied about half of the global market for sunflower oil. Many low- and middle-income countries, especially in the Middle East and North Africa, rely heavily on imports of wheat, barley, and maize from Russia and Ukraine. Europe and China are also major importers of Ukraine’s feed products. These commodities play a vital role in diets, both directly (wheat, vegetable oils) and indirectly through the livestock industry (maize, barley, but also wheat and sunflower meals). The disruption of Ukraine’s exports, as a direct result of the conflict, and of Russia’s exports, as an indirect result of international sanctions and subsequent increases in global food prices, thus pose a threat to food security and nutrition for many countries. INTRODUCTION 1 https://www.ifpri.org/landing/war-ukraine-blog-landing-page Beyond food products, key inputs to the food system are also affected. Russia is a major source of natural gas, exporting about 20% of globally traded natural gas and, before the war, supplying some 40% of the Euro- pean Union’s imports. Along with its ally Belarus, Russia is an important exporter of potash, phosphate, and nitrogenous fertilizers (ammonia and urea), for which natural gas is a critical input. Ukraine and many other countries, including many in Europe, sub-Saharan Africa, and Latin America, have been heavily dependent on these fertilizer supplies. Rising energy prices increase not only the cost of fertilizer production, but also the cost of food processing and transport. Rising fertilizer prices contribute to rising food prices and, especially in countries that are not seeing concomitant increases in output prices, they also cut into farmers’ profits and income, reduce fertilizer use, and consequently lower productivity. These problems are magnified for small- holders already facing various market failures, especially difficulties in accessing finance, and they risk being completely excluded from accessing inputs. Price impacts of the conflict In late 2021, prices for food, including staple grains and vegetable oils, reached their highest levels in a decade. Rising prices were driven by supply chain issues related to the COVID-19 pandemic, as well as poor harvests in North and South America and Malaysia and increased use for biodiesel production (Figure 1). Low- and middle-income countries, including not only net food importers but also exporting countries such as Brazil, were already experiencing increased malnutrition as a result of these multiple crises. Jan ’06 Jan ’08 Jan ’10 Jan ’12 Jan ’14 Jan ’16 Jan ’18 Jan ’20 Jan ’22 0 50 100 150 200 250 Energy Fertilizers Grains 116 164 119 2011 food price crisis 2008 food price crisis Russian invasion China starts export restrictions on fertilizers European natural gas price reached a five-year lowest level Source: World Bank, U.S.Bureau of Labor Statistics Figure 1: Real prices for food, fertilizer, and energy (index) INTRODUCTION2 Prices and price volatility for agricultural commodities, fuel, and fertilizers increased immediately in the wake of Russia’s February invasion of Ukraine. Between 2019 and March 2022, cereal prices rose by 48%, fuel prices by 86%, and fertilizer prices by 35%. By July 2022, prices of agricultural commodities had largely returned to February 2022 levels, defying some predictions. Yet, these prices are high by historical measures, and food prices remain well above pre-COVID-19 levels, while more generalized inflation is hitting consumers and gov- ernments hard. The disruption of Ukraine’s exports added to other significant pressures on grain and oilseed markets. Starting in 2021, the scarcity of supplies impacted all major crops except rice. La Niña shifted weather patterns around the globe, leading to drought in important wheat-exporting areas, notably North America, as well as in Brazil and Paraguay, where it affected the soybean crop and subsequently reduced soybean oil production. In this context, the inventory of these products was low and any new shocks triggered price spikes. International responses — sanctions and trade policies The international community has responded to the conflict with economic and financial sanctions on Russia, adding to those already imposed after its annexation of Crimea in 2014. The sanctions, meant to cause eco- nomic pain and limit Russia’s capacity to fund the war, aim to exempt food and most fertilizers, which account for only 5% of Russia’s export earnings. However, trade in agriculture and fertilizer products has become more difficult and suffered some declines because of the complexity and scope of the sanctions, reluctance of many countries and businesses to risk involvement, and export taxes imposed by Russia. Russia’s natural gas exports have proved to be an even thornier problem, as Europe and other regions rely on imports for energy and fertilizer production. Given Ukraine’s important role as a major breadbasket, negotiations sought to protect these exports. Yet Russia’s blockade of Ukraine’s Black Sea ports, plus Ukrainian mines placed to forestall Russian attack, effectively pre- vented cargo ships from leaving these ports. An agreement between Russia and Ukraine, brokered by Türkiye and the United Nations in July 2022, allowed for exports from the ports, under Ukrainian escort, to relieve the bottleneck of Ukrainian wheat. However, Russia’s brief withdrawal from the agreement in October provided a reminder of how tenuous the situation remains. The international community has also responded with financial and knowledge support for vulnerable coun- tries, including a G7-led Global Alliance for Food Security and a UN Global Crisis Response Group. Financial support for agriculture and food security in the most vulnerable countries is expected to increase by about US$12 billion. Members have committed to increasing support for the G20’s Agricultural Market Information System (AMIS), which provides greater transparency on food, agriculture, and, increasingly, fertilizer markets, helping to limit disruptions. Indeed, evidence-based and accurate information related to crises is key to reas- suring markets and avoiding ill-advised policies. In a misguided attempt to guard their national food security, several countries imposed restrictions on exports of key commodities. Export bans enacted to guard food security during the COVID-19 pandemic were generally short-lived, but the Russia-Ukraine war revived interest in them. By mid-April 2022, 17% of total traded calories were affected by trade bans. By December 2022, this level had fallen to 7.3%, but unfortunately, such efforts to insulate domestic markets can have negative consequences for the most vulnerable and contribute to the global food price crisis. They also hurt local farmers, as demonstrated by the protests and concerns raised by smallholders in India following the export bans on wheat and in Indonesia following the ban on palm oil exports. INTRODUCTION 3 Country impacts The impacts of the Russia-Ukraine war and related food price volatility vary by country and region, as do the appropriate responses to ensure food security for their populations. The Middle East and North Africa region (MENA) has been most directly affected by the conflict. MENA is the largest importer of Russian and Ukrainian wheat, and also a major importer of other grains and vegetable oil from Ukraine. Egypt, for example, is a major consumer of wheat and heavily subsidizes bread for its consumers. The country imports 62% of its supply, pri- marily from Russia and Ukraine, making it the world’s largest wheat importer. For countries like this, the short- term solution lies in finding new suppliers and readjusting social safety nets to better target the neediest and to support consumption of other foods. In the longer term, such countries will need to pursue several options, including increasing sustainable domestic production through investment in R&D and infrastructure, reducing wheat consumption and increasing dietary diversity (with the potential added benefit of healthier diets), and better targeting their social safety nets. Several countries in the MENA region face a “polycrisis” — not only slow economic recovery and high food prices in the wake of COVID-19, but also protracted war or civil strife, economic collapse, and long-term cli- mate challenges. This is the case for Yemen, Sudan, Lebanon, and other countries where the food and fuel price crisis is an added stressor in an already dire situation. In Yemen, where civil war has been ongoing since 2015, the economy is devastated, and poverty and malnutrition are pervasive. Half of the population receives food assistance, and imported wheat and vegetable oil are a major source of calories. For these countries, an increase in humanitarian aid is the only viable short-term solution. Protecting their commercial imports from export restrictions also remains essential. For the longer term, conflict resolution and macroeconomic recovery are critical to reestablishing food security. The indirect impacts of the crisis will also be quite significant in many vulnerable countries, especially in Africa south of the Sahara, where rates of poverty and malnutrition are generally high, and governments have limited means. While the global food price increase may have little negative impact on local food sources, such as cassava, the overall rise in prices for imported foods and many consumer goods — resulting from fuel price increases — will affect poor consumers most severely. For example, in Malawi, maize accounts for 36% of food purchases by the poor, even though many of them produce some of the maize they eat. Any increase in the price of maize will curtail their ability to feed themselves. At the same time, the rise in fertilizer prices will cut into farmers’ profits and lead many to limit fertilizer use, thus reducing production and food availability. The short- term response for these countries will require strengthening safety net programs and extension services to help farmers optimize their fertilizer use. Long-term solutions require investment in agricultural production, including R&D and infrastructure to boost sustainable productivity and adapt to climate change. Indeed, mitigating both internal and external shocks calls for a balanced approach. But both of these solutions put governments in a predicament — they require the use of scarce funds, which will likely lead to more pressure on foreign reserves and further increase the price of imports. What IFPRI has done In response to the crisis, IFPRI researchers developed and enhanced several tools for both analysts and policy- makers, and produced and publicized modeling results and analysis at the global and country level for countries most vulnerable to food system disruptions. Through our Food Security Portal, IFPRI provides access to several useful tools that compile up-to-date information on food systems. The Excessive Food Price Variability Early Warning System identifies periods of excessive price variability for major agricultural crops and is updated on a daily basis. Tracking food price volatility serves as a “temperature check” on global food markets, as well as an important early warning for potential crises. The Fertilizer Dashboard provides several years of data on INTRODUCTION4 https://www.foodsecurityportal.org/tools/excessive-food-price-variability-early-warning-system https://www.foodsecurityportal.org/tools/excessive-food-price-variability-early-warning-system https://www.foodsecurityportal.org/tools/excessive-food-price-variability-early-warning-system https://public.tableau.com/app/profile/laborde6680/viz/Fertilizer_Dashboard/FertilizerDashboard fertilizer prices and trade, and the Food and Fertilizer Export Restrictions Tracker provides publicly available data on restrictions affecting trade in major food and fertilizer markets. To predict likely impacts of the crisis, researchers used IFPRI’s economywide model (RIAPA) to estimate the effects of food, fuel, and fertilizer price shocks for a wide range of countries in Asia, Africa, and the Middle East. Using country-specific parameters, these simulations examine diverse effects on GDP, employment, production, household consumption, inequality, poverty, and diet quality, which serve as the basis for country-appropriate responses recommended in a series of briefs. IFPRI is also hosting a policy seminar series on Food and Fertilizer Price Trends, which brings experts together to discuss the potential impacts of rising prices and policy responses on global food security and nutrition. Lessons from the crisis Crises such as this have roots in multiple shocks or long-term pressures — in this case, the slow recovery from the global pandemic, conflict, and climate-related disasters — and are becoming increasingly common, especially as climate change advances. These crises not only overlap but also amplify disruptive impacts on food produc- tion and markets. Such complex situations will likely drive rising numbers of food-insecure and malnourished people, disrupt farmers’ livelihoods and leave long-lasting impacts on well-being. The links between drought, war, and food insecurity, for example, are evident in many places. Our experience with the current food price crisis offers several key policy lessons, which are elaborated in the blog posts that follow. Foremost among them is the critical role of trade in ensuring food security. Keeping markets open for food and fertilizers — and expanding the number of producers and markets — can reduce price volatility and help ensure delivery of food where it is needed. Grain and vegetable oil supplies can also be increased in the short term by suspending biofuel mandates and avoiding taking land out of food and feed production. In the medium term, countries can invest in increasing sustainable food production. As more countries develop resilient and competitive agricultural systems, importing countries will have access to more trade partners and be able to diversify their sources of imports. Fertilizer production is not easily increased in the short run, but efforts should be pursued to ensure increased efficiency and efficacy of fertilizer appli- cation, as well as innovative plant nutrition solutions. Finally, humanitarian assistance for those most in need and well-targeted social protection, through food or cash transfers, can prevent hunger and malnutrition and deter the devastating long-term impacts of a global food crisis, but these should not detract from efforts to meet long-term development goals and build resilience to future shocks. INTRODUCTION 5 https://public.tableau.com/app/profile/laborde6680/viz/ExportRestrictionsTracker/FoodExportRestrictionsTracker https://agrilinks.org/activities/ifpri-analyses-country-level-impacts-high-food-fuel-and-fertilizer-prices https://www.ifpri.org/spotlight/food-fertilizers-and-nutrition-rising-prices-and-global-food-security JAN APRFEB MAYMAR JUN RUSSIAN-UKRAINE WAR: 2022 TIMELINE OF EVENTS FEBRUARY/MARCH: The United States, European Union, and allies issue economic sanctions on Russia. APRIL: Prices for fertilizer, grains, and oilseed, and energy rise sharply. APRIL: Russia withdraws all troops from Kyiv before launching a new offensive in eastern Ukraine. MARCH: The war displaces nearly one-quarter of Ukraine’s population. MARCH: Staple food prices grow more volatile, and the FAO warns that the conflict could threaten global food security. MAY: Russian forces take control of Mariupol, a highly strategic southeastern port city. MARCH 2: The UN General Assembly condemns Russia’s invasion of Ukraine. FEBRUARY 24: Russian forces attack Ukraine. JUL OCTAUG NOVSEP DEC JUNE/JULY: The EU adopts a plan to limit its dependence on Russian energy. EU and G7 countries issue new sanctions and expand the SWIFT ban. AUGUST: Shelling near Ukraine’s Zaporizhzhia nuclear power plant renews fears of a nuclear accident. OCTOBER: Russia renews its offensive with missile strikes in 14 regions of Ukraine. NOVEMBER: The UN reports more than 6,000 civilian deaths and 10,000 injuries from the war. Nearly 8 million people have fled as refugees and more than 6.5 million are internally displaced. NOVEMBER: The Black Sea Grain Initiative is extended for 120 days. JULY: Russia and Ukraine agree to the Black Sea Grain Initiative to allow food and fertilizer exports. SEPTEMBER: Ukrainian forces make major advances, and Russia moves to annex occupied territory. SEPTEMBER: FAO’s Food Price Index declines substantially, but food price inflation remains high globally. S E C T I O N 1 A CONFLICT WITH GLOBAL CONSEQUENCES 1 How will Russia’s invasion of Ukraine affect global food security? Joseph Glauber and David Laborde Originally published February 24, 2022. The unfolding crisis in Ukraine has roiled commodity markets and threatens global food security. Ongoing fall- out from the COVID-19 pandemic and other factors have already driven up food prices. Poor harvests in South America, strong global demand, and supply chain issues have reduced grain and oilseed inventories and driven prices to their highest levels since 2011–2013. Vegetable oil prices have also been at record levels, reflecting the short South American soybean crop, reduced palm oil supplies due to harvest problems in Malaysia, and sharply increased use of palm and soybean oil for biodiesel production. Prices of key energy-intensive inputs like fuel, fertilizer, and pesticides have also been at near-record levels. Russia’s invasion of Ukraine will further disrupt global markets, will have negative consequences for global grain supplies in the short term, and by disrupting natural gas and fertilizer markets, have negative impacts for producers as they enter a new planting season. This could push up already-high food price inflation, and have serious consequences for low-income net-food-importing countries, many of which have seen an increase in malnourishment rates over the past few years in the face of pandemic disruptions. In this post, we discuss the global implications of the crisis; however, we should not forget the direct impacts of the war on local populations. Military operations could lead to the displacement of 1.5 million to 5 million people in Ukraine, leading to a major food crisis. As the State of Food Security and Nutrition and Global Report on Food Crisis reports point out, conflicts remain a key driver of food insecurity in the world. The rising role of the Black Sea in global food security Over the past 30 years, the Black Sea region has emerged as an important global supplier of grains and oil- seeds, including vegetable oils (Figure 1). In the early 1990s, following the breakup of the former Soviet Union, the region was a net importer of grain. Today, Russia and Ukraine’s exports account for about 12% of total cal- ories traded in the world, and the two countries are among the top five global exporters for many important cereals and oilseeds, including wheat, barley, sunflower seeds, and maize. Ukraine is also an important source of sunflower seed oil, supplying about 50% of the global market. Many importing countries depend heavily on these products from Ukraine and Russia. North Africa and the Middle East (MENA) import over 50% of their cereal needs and a large share of wheat and barley from Ukraine and Russia. Ukraine is an important supplier of maize for the European Union and China, as well as several North African markets including Egypt and Libya. Likely short-term impacts The crisis will likely have an immediate impact on grain exports from Ukraine and Russia. Most of the wheat and barley crops are harvested in the summer and exported during the fall. By February, most wheat, barley, and sunflower seed exports are largely completed. Ukraine maize exports typically remain heavy through the GLOBAL CONSEQUENCES10 https://www.ifpri.org/blog/covid-19-and-rising-global-food-prices-whats-really-happening https://www.fao.org/worldfoodsituation/foodpricesindex/en/ https://www.fao.org/publications/sofi/2021/en/ https://www.fao.org/publications/sofi/2021/en/ https://www.rand.org/blog/2022/02/ukraine-invasion-could-spark-a-massive-refugee-crisis.html https://www.rand.org/blog/2022/02/ukraine-invasion-could-spark-a-massive-refugee-crisis.html https://www.fao.org/3/I7695e/I7695e.pdf https://www.wfp.org/publications/global-report-food-crises-2021 https://www.wfp.org/publications/global-report-food-crises-2021 https://datawrapper.dwcdn.net/LX3Bg/5/ https://datawrapper.dwcdn.net/LX3Bg/5/ https://datawrapper.dwcdn.net/KQ5im/7/ spring into the early summer. Most grain flows out of Odessa and other western ports on the Black Sea, far from the occupied areas in the East, but disruptions are looking increasingly likely given Russia’s latest military actions. Military operations could have short- and long-term consequences for the capacity to move Ukraine’s crop production within and beyond its borders, especially if port facilities and railroads are damaged through terrestrial and aerial operations, or by cyber-attacks targeting various infrastructures and their management. Looking forward to 2022 crops, the Luhansk and Donetsk Oblasts account for about 5% of Ukraine’s barley production, 8% of wheat production, 9% of sunflower seed production, and a negligible share of maize pro- duction. The occupied areas of Luhansk and Donetsk are in their easternmost parts, bordering Russia. However, large areas of production are in other parts of Ukraine that directly border Russia and Belarus where Russian troops have also massed — between 25 to 30% of maize and sunflower seed production, 10 to 15% of barley production, and 20 to 25% of wheat production are in such oblasts. Spring barley will be planted in March, while maize planting typically begins in April. Winter wheat typically won’t be planted until September. Longer-term effects: Impacts on fertilizer and energy inputs The Russian invasion of Ukraine will likely provoke countermeasures by the EU, United States, and other countries, which could have large impacts on Russian exports of natural gas and fertilizers. Russian exports of natural gas account for about 20% of global trade and Russia supplies about 40% of the EU’s current imports. Sanctions could halt trade and drive up natural gas prices to even higher levels (Figure 2). While European importers could switch to other suppliers such as the United States, logistical issues — the US exports liquified natural gas — add costs, and these supplies would not provide significant relief, at least in the short term. Natural gas is also an important feedstock for the production of nitrogenous fertilizers such as ammonia and urea. The impact on fertilizer prices would be further exacerbated by the fact that Russia is an important supplier of nitrogenous fertilizers and potash. Russia account for 15% of global trade in nitrogenous fertilizers and 17% of global potash fertilizer exports. Belarus, an ally of Russia and staging ground for the current invasion and already being targeted by some international sanctions, accounts for an additional 16% of global market share of potash exports. Dependency for some countries, including Ukraine, on the supply from these two countries is quite extreme (60% or more, see Figure 3). Russian Federation Ukraine Barley Maize Sunflower Sunflower Oil Wheat 0% 10% 20% 30% 40% 50% 60% 70% 80% 14.2 12.6 15.3 19.6 4.3 23.1 49.6 24.1 10 Note: Intra-EU trade excluded from computations. Source: COMTRADE Figure 1: Ukraine and Russia’s share of global trade, 2018–2020 GLOBAL CONSEQUENCES 11 https://ipad.fas.usda.gov/rssiws/al/crop_production_maps/Ukraine/Ukraine_Barley.jpg https://ipad.fas.usda.gov/rssiws/al/crop_production_maps/Ukraine/Ukraine_wheat.jpg https://ipad.fas.usda.gov/rssiws/al/crop_production_maps/Ukraine/Ukraine_Sunflowerseed.jpghttps:/ipad.fas.usda.gov/rssiws/al/crop_production_maps/Ukraine/Ukraine_Sunflowerseed.jpg https://ipad.fas.usda.gov/rssiws/al/crop_production_maps/Ukraine/Ukraine_Corn.jpg https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/belarus-struggling-to-find-path-to-market-for-potash-amid-us-sanctions-68990380 The global fertilizer market has been reeling from record high prices. Further shortages will have global impli- cations, particularly in developing countries where price impacts could significantly reduce fertilizer use and result in poor local harvests at a time of reduced global stocks and record global prices. Conclusion: Possible next steps Russia’s invasion of Ukraine poses serious risks to global food security that will require a range of responses from governments and international organizations. The situation remains very fluid and introduces considerable uncertainty into an already tight global marketplace. Of immediate concern is the vulnerability of net-food-im- porting countries highly dependent on Ukraine for supplies — such as the highly exposed countries in the MENA region. The global response to the Ukrainian situation should include a strong global food security dimension, and ensure that any sanctions placed on Russia not impact third parties reliant on Russian exports. To the extent possible, food and fertilizer exports should be allowed to continue unimpeded; failing that, mitigation packages should be provided to affected third-party countries. Placing sanctions on those sectors will only exacerbate world shortages and penalize mainly populations that are already food insecure. With skyrocketing agricultural prices, there is a risk that some countries may seek to insulate domestic pro- ducers by restricting exports. Such moves should be avoided. As we saw in 2007/08 and 2010/11, these beg- gar-thy-neighbor policies can have harmful effects on importing countries, particularly the most vulnerable. In this context, both the sanctions aimed to enforce international laws and export restrictions used to protect domestic consumers have to be designed to protect global food security, and consequences for third parties need to be assessed carefully. Finally, the reliance of many countries in the world on Russian energy products will trigger important policy debates. Calls for greater energy sovereignty and diversification will likely occur. However, policies that call for ramping up production of biofuels should be viewed with skepticism. Redirection of the current consumption of food crops (maize, wheat, oilseeds) to non-food uses around the world, from the EU to Indonesia, is already generating significant tensions in food and fertilizer markets. A holistic approach regarding food and energy security is critical in ensuring that food and nutrition outcomes remain a priority. Jan 2020 Apr Jul Oct Jan 2021 Apr Jul Oct Jan 2022 0 10 20 30 40 50 US European Union Note: US price based on Natural Gas, next month, contract. European price based on Dutch TTF contract. MMBTu = million British Thermal Units. Figure 2: European and US natural gas evolution, US dollars per MMBTu GLOBAL CONSEQUENCES12 https://www.ifpri.org/blog/covid-19-trade-restrictions-are-worst-possible-response-safeguard-food-security https://www.ifpri.org/blog/covid-19-trade-restrictions-are-worst-possible-response-safeguard-food-security Source: COMTRADE. Source: COMTRADE. Figure 3: Countries’ dependency on nitrogenous and potassium fertilizers originating from Belarus and the Russian Federation, 2018–2020 A. Percentage of nitrogenous fertilizer imports B. Percentage of potassium fertilizer imports 10 20 30 40 50 60 70 80 90 10 20 30 40 50 60 70 80 90 GLOBAL CONSEQUENCES 13 Update After peaking in May 2022, agricultural prices have generally fallen back to pre-war levels and price volatility has fallen as well. While some may conclude that the global food crisis is over, concerns remain. Despite the partial reopening of the Black Sea to shipping, the deal struck between Russia and Ukraine remains tenuous. Indeed, Russia’s threat of pulling out of the agreement in late October pushed global wheat prices up by more than 5%. The current agreement runs through March 2023, and markets will be monitoring negotiations between the parties very carefully. In the meantime, fall wheat plantings in Ukraine are estimated to be down by more than 30%, reflecting the impact of the war itself, higher input costs, and depressed domestic prices due to the high costs of transporting grain and oilseeds to market. As a result, the impact of the war on global crops will be felt again in 2023. Projections by the U.S. Department of Agriculture and others suggest that year-end stocks will remain tight this year with no significant rebuilding. Argentina’s wheat and soybean crops are estimated to be down due to drought; and despite a record harvest in Australia, heavy rains in the Southeast may have affected quality. There has also been some increase in rice prices over the past six months, reflecting higher input costs (and lower margins). But the real concern remains the war itself. As long as the war continues, Ukraine’s agriculture (accounting for 6% of global agricultural ex- ports on a caloric basis) will continue to operate at a limited level. That export deficit will have to be made up elsewhere or food costs will remain high. GLOBAL CONSEQUENCES14 2 A food crisis was brewing even before the Ukraine war — but taking these three steps could help the most vulnerable Derek Headey and Kalle Hirvonen Originally published by IFPRI March 25, 2022. Russia’s invasion of Ukraine has led to the disruption, by sanctions or war, of two of the world’s largest grain exporters. This means 2022 is shaping up to be a very difficult year for the global food system. Yet there were concerns that this system was creaking at the seams as far back as 2007. At that time, there were steeply rising food prices driven by rising oil prices, explosive demand for corn-based biofuels, high shipping costs, financial market speculation, low grain reserves, severe weather disruptions in some major grain produc- ers, and a swath of nervy trade policies leading to further shocks that worsened the problem. The World Food Program’s director general described it as a “perfect storm.” Prices spiked again in 2011/12 before gradually receding. In retrospect, those storms might now appear temperate in comparison to that we face in 2022. Even before the current crisis unfolded, food, fertilizer, oil, and shipping costs were rising steeply. The FAO cereal price index shows prices hit their 2008 level in 2021, and since the invasion they have explod- ed. Between 2019 and March 2022, cereal prices increased by 48%, fuel prices by 86%, and fertilizer prices by 35% (Figure 1). Here are three factors that we think make the situation in 2022 much worse, and three measures that could help prevent a global food supply system collapse. The poor are still recovering from the COVID-19 crisis Back in early 2008, both the developed and the developing world had just experienced an unprecedented period of rapid economic growth and poverty reduction, in some cases after decades of stagnation. The global financial crisis of 2007–2008 only briefly halted growth in the developing world. Many governments and inter- national institutions recognized the need to reinvest in agriculture, and found resources to do so. But fast-forward to 2022, and the world has not yet recovered from the repercussions of the COVID-19 pan- demic, the worst economic crisis since World War II. There are no truly rigorous estimates of COVID’s impact on global poverty, but the World Bank has estimated that 2020 saw an extra 97 million people thrown into poverty. Household surveys and economic models consistently find that the pandemic had the most severe economic impact on the urban poor, while agriculture and the rural economy remained remarkably resilient to lockdowns and other demand shocks. Higher food prices may even have had a poverty-reducing effect in rural areas. But the urban poor lost out and, after two years of turmoil, are being hit hard again, now by food price inflation. GLOBAL CONSEQUENCES 15 https://onlinelibrary.wiley.com/doi/full/10.1111/j.1574-0862.2008.00345.x https://www.sciencedirect.com/science/article/abs/pii/S0306919210001065 https://reliefweb.int/report/burkina-faso/wfp-chief-calls-support-combat-perfect-storm-over-africas-rural-poor https://www.ifpri.org/blog/how-will-russias-invasion-ukraine-affect-global-food-security https://theconversation.com/ukraine-how-the-global-fertiliser-shortage-is-going-to-affect-food-179061 https://theconversation.com/how-the-crisis-in-container-ships-could-ruin-christmas-166297 https://blogs.worldbank.org/opendata/updated-estimates-impact-covid-19-global-poverty-turning-corner-pandemic-2021 https://www.ifpri.org/publication/impacts-covid-19-global-poverty-food-security-and-diets https://www.ifpri.org/publication/impacts-covid-19-global-poverty-food-security-and-diets https://openknowledge.worldbank.org/entities/publication/fd1aaeb6-a604-546f-bd33-3f576a23c484 Cash-strapped governments have little room to maneuver Both developed and developing economies are weaker today than in 2008. To their credit, governments in the developing world provided unprecedented protection for households and businesses and digital innovations for reaching the poor during the pandemic. But as a result, many economies face large debt burdens relative to national income, as well as growing deficits, weak exchange rates, uncertain near-term economic growth prospects, and foreign investors and development partners that are also short of cash. Africa is undoubtedly one of the most vulnerable regions. North Africa is a huge net importer of wheat, most of which comes from Russia and Ukraine, so it faces a particularly acute food crisis. Sub-Saharan Africa is predom- inantly rural, but its growing urban populations are relatively poor and more likely to consume imported grains. 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 Fo o d , f ue l, an d fe rt ili ze r p ri ce in d ic es (2 00 0= 10 0) G D P g ro w th in L M IC s 0 100 200 300 400 -5% 0% 5% 10% 15% Source: FAO/IMF/World Bank Figure 1: Food, fuel, and fertilizer prices vs. low- and middle-income country GDP growth, 2000–2022 2007–2008 food, fuel, and fertilizer crisis 2007–2008 crisis preceded by 6.2% annual GDP growth rate in LMICs over 2003–2007 2021-2022 food crisis preceded by -4.2% contraction in LMICs’ GDP (7-point swing) 2011–2012 food, fuel, and fertilizer crisis 2021–2022 food, fuel, and fertilizer crisis GLOBAL CONSEQUENCES16 https://socialprotection.org/discover/publications/social-protection-and-jobs-responses-covid-19-real-time-review-country https://blogs.adb.org/blog/your-service-indonesia-s-government-agencies-look-digital-innovations-amid-covid-19 https://blogs.adb.org/blog/your-service-indonesia-s-government-agencies-look-digital-innovations-amid-covid-19 https://theconversation.com/russia-ukraine-crisis-poses-a-serious-threat-to-egypt-the-worlds-largest-wheat-importer-179242 Farmers in many parts of Africa are struggling to access fertilizers, even at inflated prices, due to shipping and foreign exchange problems. Exorbitantly high costs will erode farmers’ profits and could reduce incentives to increase production, dampening the poverty-reduction benefits of higher food prices. Countries already affected by conflict and climate change are exceptionally vulnerable. War-ravaged Yemen is heavily dependent on imported grains. Northern Ethiopia is one of the poorest regions on Earth, facing ongoing conflict and a humanitarian crisis. And Madagascar was slammed by successive tropical storms and cyclones in January and February, leaving its food system broken. In Afghanistan, child mortality rates are soaring due to the collapse of the economy and basic health services. Myanmar’s GDP shrunk by 18% after the military coup in February 2021, and food prices have since increased by 19%. A crisis with no end yet in sight The 2007/08 food crisis was relatively short lived, and the global food system responded swiftly with increased supply. But who can say with any confidence whether the effects of the Ukraine crisis on food, fuel, and fertilizer prices will end any time soon? Russia and Ukraine account for more than 30% of global grain exports, Russia alone provides 13% of global fertilizer and 11% of oil exports, and Ukraine supplies half of the world’s sunflower oil. In combination, this is a huge supply shock to the global food system, and a protracted war in Ukraine and the growing isolation of Russia’s economy could keep food, fuel, and fertilizer prices high for years. Three things that can be done What can be done to buffer the worst impacts of this crisis? • First, major grain producers must do everything they can to increase food supply: resolve logistical bottle- necks, release stocks, and resist the urge to impose food export restrictions. In particular, Southeast Asian countries must band together and avoid the crisis spreading to rice markets through trade restrictions. • Second, in the short term the world needs oil-producing nations — often huge net importers of food — to increase fuel supplies to help bring down fuel, fertilizer, and shipping costs. This will benefit the entire global food system. Oil exporters can also step in to increase foreign assistance, especially for humanitarian aid. But in the long term we need to reduce global dependence on fossil fuels, including in agriculture. • Third, governments, international institutions, and even the private sector must offer social protection via food or financial aid. The pandemic’s effects hit the poor and vulnerable hard, and for much longer than expected. Despite their sometimes dire fiscal circumstances, governments must again reach deep into their treasuries to reinvigorate this protection — and the international community must help them. There is simply no other alternative for averting a humanitarian disaster that will hit the developing world hard this year, and conceivably well into years to come. This post first appeared on The Conversation. GLOBAL CONSEQUENCES 17 https://www.wsj.com/articles/farms-are-failing-as-fertilizer-prices-drive-up-cost-of-food-11642770182 https://www.voanews.com/a/afghanistan-faces-return-to-highest-maternal-mortality-rates-/6474248.html https://myanmar.ifpri.info/2021/10/14/monitoring-the-agri-food-system-in-myanmar-food-vendors-july-2021/ https://myanmar.ifpri.info/2021/10/14/monitoring-the-agri-food-system-in-myanmar-food-vendors-july-2021/ https://www.fao.org/director-general/news/news-article/en/c/1476480/ https://wits.worldbank.org/trade/comtrade/en/country/ALL/year/2018/tradeflow/Exports/partner/WLD/product/310210 https://wits.worldbank.org/trade/comtrade/en/country/ALL/year/2018/tradeflow/Exports/partner/WLD/product/310210 https://www.fao.org/director-general/news/news-article/en/c/1476480/ https://asean.org/member-states/ https://asean.org/member-states/ 3The Russia-Ukraine war’s impact on global food markets: A historical perspective Joseph Glauber, David Laborde, and Johan Swinnen Originally published April 6, 2023 The Russia-Ukraine war has focused global attention on the key economic roles those countries play as major exporters of agricultural commodities. Over the 2019–2021 period, they accounted for 12% of global agricultural trade on a kilocalorie basis, with a combined market share of 34% for wheat, 26% for barley, 17% for maize, and 75% for sunflower oil. The war has scrambled this picture, with Ukraine’s exports falling dramatically, and Russia’s falling, then recovering. While the Black Sea region has historically been a major grain producer, its emergence as a major world ex- porting region is a relatively recent phenomenon. From the 1970s until the early 2000s — the decades imme- diately before and after the collapse of the Soviet Union — Russia and Ukraine were net grain importers. This post examines how and why Russia and Ukraine became such important factors in 21st century global food markets — and thus why the war poses a continuing threat to global food security. Distortions in the Soviet Union and collapse in the 1990s transition By the early 1970s, the Soviet Union had become a large net importer of wheat (Figure 1a) and maize (Figure 1b). This was the direct result of Soviet economic policies; specifically, production shifted away from grains after the government instituted a policy to stimulate meat and dairy production and consumption via large subsidies provided through massively distorted prices. Grain imports continued in the years following the formal dissolution of the Soviet Union in 1991, but for dif- ferent reasons. After 1991, Russia’s agriculture sector, like the overall economy, collapsed. The region’s abrupt transition from a planned to a market economy during the 1990s resulted in a severe decline in agricultural gross output. Dairy, livestock, and grain production all fell. Land reforms in Ukraine and Russia were introduced slowly as part of the economic transition. As collective farms were broken up, many small operations struggled, unable to take full advantage of scale efficiencies offered by mechanization and other technologies. Full private ownership of land with transfer rights evolved gradually; in Ukraine, a major land reform was introduced in 2002, but the moratorium on land sales transactions was only lifted in 2021. At the same time, capital constraints restricted fertilizer use and disruptions in supply chains made grain trade costly. As a result of these problems, cereal area in Russia fell by over 25% in the 1990s, from almost 60 million hectares in 1992 to 43 million in 2001. In addition, grain yields in Russia and Ukraine declined strongly in the 1990s as fertilizer use fell by about two-thirds. As a result, both Ukraine and Russia continued to be net importers of cereals. Productivity growth since 2000 Agricultural production in Russia and Ukraine began to turn around after 2000. By then, improvements in property rights and farm restructuring efforts in the 1990s began yielding increasing productivity. Around the GLOBAL CONSEQUENCES18 https://www.ifpri.org/blog/how-will-russias-invasion-ukraine-affect-global-food-security https://www.ifpri.org/blog/how-will-russias-invasion-ukraine-affect-global-food-security chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.ers.usda.gov/webdocs/publications/83285/err-228.pdf?v=921.8 chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.ers.usda.gov/webdocs/publications/83285/err-228.pdf?v=921.8 https://publications.jrc.ec.europa.eu/repository/handle/JRC84652 https://onlinelibrary.wiley.com/doi/10.1111/1477-9552.12338 https://www.fao.org/faostat/en/#data/QCL https://www.fao.org/faostat/en/#data/RFN https://www.aeaweb.org/articles?id=10.1257/0022051041409048 Figure 1: Net wheat and maize exports from the former Soviet Union, metric tons Source: USDA/FAS PSD database, February 8, 2023 A. Wheat B. Maize Russia Ukraine Other FSU countries Union of Soviet Socialist Republics Note: July/June marketing year, 1970 = 1970/1971 −20M 20M 0M 40M 60M 1970 1980 1990 2000 2010 2020 1970 1980 1990 2000 2010 2020 −20M 20M 0M GLOBAL CONSEQUENCES 19 same time, the Russian and Ukrainian economies recovered from the late 1990s financial crisis and investments increased in the agriculture sector. Wheat yields for Russia and Ukraine rose steadily — by 1.4% and 1.8% annually, respectively — between 2002/02 and 2021/22. Maize yields showed even larger growth. Ukraine’s maize yields have risen by 4.4% annually over the last 20 years, while Russian maize yields have risen by 5.5% per year. Nevertheless, many problems remain. Cereal production in Russia and Ukraine has shown a relatively high degree of variability during the last two decades, and research suggests that yields of these crops in Ukraine and Russia have not reached their maximum potential. The relatively high vulnerability of crop yields to adverse weather conditions and the relatively low yields compared to European Union levels are also related to limited access to credit and finance and uncertainties in the regulatory framework of the agriculture sector, which create a barrier for input use (such as fertilizer and plant protection) and general investments. Figure 2: Former Soviet Union wheat and maize production, metric tons Source: USDA/FAS PSD database, February 8, 2023 Russia Ukraine Other FSU countries Union of Soviet Socialist Republics 50M 0M 100M 150M 1970 1980 1990 2000 2010 2020 GLOBAL CONSEQUENCES20 https://publications.jrc.ec.europa.eu/repository/handle/JRC84652 https://onlinelibrary.wiley.com/doi/10.1111/1477-9552.12338 https://publications.jrc.ec.europa.eu/repository/handle/JRC80164 https://publications.jrc.ec.europa.eu/repository/handle/JRC84652 Growth of exports and new markets As production rebounded in the 2000s (Figure 2), grain exports increased dramatically and accelerated in the past decade. From 2012/13 to 2021/22, annual wheat exports increased by 10.0% annually in Russia and 11.3% in Ukraine, while the rest of the world’s wheat exports increased by only 2.3% per year. Over the same 10-year period, Russian and Ukrainian maize exports increased by 7.6% and 6.5% per year, respectively. What are the principal market destinations for Russian and Ukrainian crops? Given the proximity of the Black Sea, countries in North Africa and Western Asia have been the primary destinations for wheat exports (Figure 4). Those countries combined accounted for about half of Russian and Ukraine wheat exports over the period 2019–2021. Yet market destinations have also changed and evolved with expanding production. Wheat exports to the rest of Asia have risen over the past 20 years and accounted for 13% of Russian wheat exports over the period 2019–2021. Countries such as Indonesia, the Philippines, and more recently Pakistan have become important buyers of Ukrainian wheat. Overall, Asian markets account for almost 40% of its wheat exports (2019–2021). African countries south of the Sahara are a small but growing market, accounting for almost 13% of Russia’s exports and 8% of Ukraine’s exports in 2019–2021. Figure 3: Russian and Ukrainian crop yields, metric tons per harvested hectare Source: USDA/FAS PSD database, February 8, 2023 1987/1988 1991/1992 1995/1996 1999/2000 2003/2004 2007/2008 2011/2012 2015/2016 2019/2020 0 1 2 3 4 5 6 7 Russia corn Ukraine corn Russia wheat Ukraine wheat GLOBAL CONSEQUENCES 21 Total: 19.5M Total: 35.5M Total: 28.3M Total: 3.7M Figure 4: Ukrainian and Russian wheat exports by destination, 2019–2021, metric tons Figure 5: Ukrainian and Russian maize exports by destination, 2019-2021, metric tons Source: COMTRADE Source: COMTRADE Ukraine 18% 31% 8% 39% 34% 27% 15% 13% 7% Russia Ukraine Russia Western Asia Northern Africa Africa, South of Sahara Asia Europe Americas Other Western Asia Northern Africa Africa, South of Sahara Asia Europe Americas Other 12% 17% 32% 38% 28% 32% 9% 28% The market composition for Russian and Ukrainian maize is less similar than that of wheat exports (Figure 5). In recent years, both countries have shipped about almost one-third of their maize to Asian markets such as China. The remainder of Russia’s maize exports go to markets in North Africa and Western Asia (largely Middle Eastern countries like Syria and Türkiye). North Africa and Western Asia are important markets for Ukraine as well (accounting for almost 30% of its exports over 2019 to 2021). The remainder of Ukraine’s maize exports go largely to Europe (about 40%), whose feed manufacturers have a preference for non-GMO maize. Neither Russia nor Ukraine is a significant exporter of maize to African countries south of the Sahara. Increasing reliance on Black Sea grains The expanding production and exports of Russian and Ukrainian agricultural products over the past two decades has made them important players in global markets. This increased many countries’ reliance on the region to GLOBAL CONSEQUENCES22 meet key import needs (Figure 6) — and made their populations more vulnerable to the war’s disruptions. For example, Ukraine and Russia accounted for 50% of Egypt’s wheat imports in 2013; by 2021, they accounted for over 76% of its imports. Indonesia imported 8% of its wheat needs from the two countries in 2013 and almost 27% in 2021. Ukraine accounts for over 55% of the European Union’s maize imports compared to less than 5% prior to the mid-2000s. China has become a large importer of maize as well, and Ukraine has been an important supplier, accounting for over 40% of China’s maize imports over the past three years. At the height of its trade war with the United States, China imported over 80% of its maize needs from Ukraine. The Russian invasion of Ukraine has sharply disrupted trade flows out of the Black Sea, as exports out of Ukraine’s ports were blocked, forcing traders in grains and other agricultural products to seek alternative (and more costly) export routes. While evidence suggests that Russian grain exports have largely recovered, Ukraine’s monthly export volumes continue to be well below levels of a year ago. This has caused many importing countries such as Egypt and Bangladesh to seek alternative suppliers. Conclusions The grain agreement between Ukraine and Russia has brought some hope that agricultural exports from the Black Sea region will return to more normal levels and that trade with the region will continue to grow. However, with the conflict ongoing, the agreement is at best tenuous. Production prospects in Ukraine for 2023 remain unpromising, as producers continue to face high costs of fuel and other inputs, combined with low output costs due to several factors, including a lack of sufficient storage and, despite the opening of trade corridors, high shipping costs that reduce local prices. The war’s impacts on Russia’s agriculture sector include sanctions imposed by Western countries that have raised input costs. How quickly the region rebounds — and when global market shifts and food security impacts settle down — will depend largely on how quickly the conflict comes to an end. Note: EU countries are considered as one market. Figure 6: Share of Russian Federation and Ukraine in imported calories 10 20 30 40 50 GLOBAL CONSEQUENCES 23 https://www.ifpri.org/blog/russia-ukraine-crisis-poses-serious-food-security-threat-egypt https://www.ifpri.org/blog/how-war-ukraine-threatens-bangladeshs-food-security https://www.ifpri.org/blog/russia-ukraine-grain-agreement-what-stake 4 The Russia-Ukraine war is exacerbating international food price volatility Brendan Rice, Manuel A . Hernández, Joseph Glauber, and Rob Vos Originally published March 30, 2022. The IFPRI Food Security Portal’s Excessive Food Price Variability Early Warning System is showing excessive levels of price volatility in the four major food commodities: wheat, maize, rice, and soybeans, as well as cotton. Markets for hard and soft wheat and soybeans had already been more volatile than normal since late 2021, well ahead of Russia’s invasion in Ukraine, which began on February 24, 2022. That conflict, coming on top of the ongoing effects of the COVID-19 pandemic, has already contributed to spiking food prices, with possible major consequences for global food security. Rising price volatility poses a distinct threat, as it induces greater market uncertainty, which affects production decisions, and can spur speculative behavior. Both would fan further food price inflation. What is driving the current price volatility, and what are its implications for markets and food security? The dangers of high price volatility Tracking food price volatility provides a temperature check on global food markets. When prices fluctuate, it is more difficult for farmers to make decisions about what to produce and how; businesses are more reluctant to invest in food and agriculture; and ultimately consumption decisions are affected through higher prices and/or lesser availability, particularly in rural areas that depend heavily on agriculture and among low-income households who spend most of their income on food. Volatility was high during the 2007/08 and 2010/11 global food price crises. Prices of staple foods rose quickly, followed by a period of high price variability that created major uncertainty in food markets. The excessive price variability tool was developed precisely to provide early warning of unusual price movements to market actors, including farmers, traders, investors, and policymakers. The current situation compared to the early pandemic period Food prices were already high before the Russia-Ukraine war. Poor harvests in South America, strong global demand, and pandemic-related supply chain issues had reduced grain and oilseed inventories and drove prices to their highest levels since 2011–2013. Prices of key energy-intensive inputs such as fertilizer were and continue to be at near-record levels. Then came the invasion, which is creating major market disruptions. Russia and Ukraine account for 30% of global wheat exports and supply millions of tons of wheat to food import-de- pendent developing countries in the Middle East and North Africa (MENA), South Asia, and sub-Saharan Africa. An ongoing war will certainly drive prices higher still and erode food security for hundreds of millions of people. Looking back, most staple food prices also showed excessive volatility in the aftermath of the global food price and financial crises until 2012 (Figure 1). World market prices for basic staples were then calm for the most part until the recent rise in volatility. GLOBAL CONSEQUENCES24 https://www.foodsecurityportal.org/tools/excessive-food-price-variability-early-warning-system https://www.foodsecurityportal.org/node/1858 https://www.fao.org/worldfoodsituation/foodpricesindex/en/ https://www.foodsecurityportal.org/node/1921 Among the major staples, prices of rice and wheat became very volatile following the onset of COVID-19 lockdowns, driven in part by export restrictions imposed by some major producing countries. Russia and Kazakhstan, for example, imposed export bans on wheat, and Viet Nam imposed a short-lived ban on rice ex- ports. In contrast to the 2007/08 global food price crisis, which led many countries to impose prolonged trade restrictions, most of these more limited recent measures were retracted by mid-2020 and staple food markets returned to lower, “normal” levels of volatility. This period of relative calm lasted only through the first part of 2021, as the deepening of pandemic-related supply chain disruptions mixed with strong demand driven by the global economic recovery. Source: Excessive Food Price Variability Early Warning System, Food Security Portal, facilitated by IFPRI. Excessive volatility Moderate volatility Low volatility 2008 – February 2022 2008 Feb 1, 2020 Aug 1, 2020 Aug 1, 2021Feb1, 2021 Aug 1, 2022Feb1, 2022 2010 2012 2014 2016 2018 2020 2022 February 2020 – February 2022 Hard Wheat Soft Wheat Maize Rice Soybean Hard Wheat Soft Wheat Maize Rice Soybean Figure 1: Price volatility of major food commodities GLOBAL CONSEQUENCES 25 Price volatility has continued to intensify since reaching excessive levels for wheat, maize, and soybeans in the final months of 2021. Markets for wheat and soybeans have remained volatile since, while that for maize returned temporarily to calmer waters. Following the invasion of Ukraine, however, maize prices again turned highly volatile, as did rice prices, so prices for all four staple foods are now in that state [as of March 2022]. Here is the situation for each: • Wheat: Drought in many wheat-producing regions, including North America and the MENA region, along with strong import demand from China, has created concerns over adequacy of supplies, while shipping disruptions and grain export policy in Russia pre-war added to the uncertainty in global wheat markets. The invasion has exacerbated supply concerns, intensifying price volatility. • Maize: Conflict-related supply concerns have also stoked price volatility in global maize markets. Ukraine is the world’s fourth-largest maize exporter, and the war is putting the next harvest and the country’s ca- pacity to export in jeopardy. • Soybeans: Drought in Brazil and Paraguay sharply lowered production prospects for soybeans, driving price volatility starting late in 2021. Market dynamics of other major oilseeds have also contributed to soybean price volatility. Increasing concerns over palm oil supply — particularly due to damage caused by typhoon-related flooding in Malaysia — have led to increased demand and higher prices for soybean oil, a palm oil substitute for food and fuel. Similarly, the conflict in the Black Sea region, an area that accounts for well over half of the world’s supply of sunflower seed oil, has sent buyers scrambling for alternatives — also contributing to the excessive price volatility seen in soybean markets. • Rice: The war has increased feed demand for rice on the heels of supply concerns in maize and wheat, pushing rice prices into excessive volatility territory. The importance of monitoring food price volatility in the near term Some conditions that contributed to price volatility following the initial COVID-19 lockdowns remain relevant now. Supply chain disruptions continue to be a factor, and tracking export restrictions is again important since such policies could lead food prices to spiral even higher. One difference between the two periods is the scale of the disruptions in staple food markets. While the period of initial pandemic lockdowns saw some isolated volatility, the Russia-Ukraine war is affecting all major food staples. In addition, fertilizer prices are a greater factor now than at the beginning of the pandemic. Already at extremely high levels before the war began, fertilizer prices could continue rising as potash exports from major producer Belarus are cut off and Russia, another important fertilizer producer, is considering an export ban. High prices for natural gas, a feedstock for nitrogen-based fertilizers such as urea and ammonia, have boosted fertilizer prices as well. Higher fertilizer prices could depress production, leading to less grain on the market in 2022 and putting further upward pressure on already-high food prices. With the conflict still unfolding and outcomes highly uncertain, monitoring food price volatility is more relevant now than at any time since the food price crises of 2007/08 and 2010/11 — with the food security of millions at stake. GLOBAL CONSEQUENCES26 https://www.bloomberg.com/news/articles/2022-01-18/paraguay-soybean-giant-girds-for-worst-harvest-in-two-decades?leadSource=uverify%20wall https://www.reuters.com/article/ukraine-crisis-europe-sunflower-idUSKBN2L118T https://www.spglobal.com/commodityinsights/en/market-insights/latest-news/agriculture/022822-head-and-broken-rice-price-spreads-narrow-as-feed-demand-soars https://www.ifpri.org/blog/covid-19-trade-restrictions-are-worst-possible-response-safeguard-food-security chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.amis-outlook.org/fileadmin/user_upload/amis/docs/Market_monitor/AMIS_Market_Monitor_Issue_93.pdf 5 No end in sight yet for the global food price crisis Joseph Glauber, Manuel Hernández, David Laborde, Will Martin, Brendan Rice, and Rob Vos Originally published September 27, 2022. After the sharp rise in international prices of wheat and other staple foods in the wake of Russia’s February invasion of Ukraine, since May prices have fallen back to pre-war levels. Has the global food price crisis now come to an end? Unfortunately, such a conclusion is premature. Domestic food prices for consumers continue to rise in most countries. Meanwhile, ongoing uncertainties — not the least of which is the continuing war — au- gur continued turmoil in global food markets. Global food security remains at high risk; hundreds of millions of people already face acute food insecurity and their numbers are rising, according to the Global Report on Food Crises. In this blog post, we try to disentangle the main factors in play. Given the importance of both Russia and Ukraine as suppliers in global markets for wheat, maize, sunflower seeds and oil, and Russia’s importance in international fertilizer and energy markets, the war provoked a surge in food and energy prices worldwide. The Food and Agriculture Organization (FAO)’s international food price index climbed to its all-time high in mid-May (Figure 1). At that point, wheat prices, for instance, were up 32% from their level at the start of the war. Then prices fell, with those of agricultural commodities, including wheat, Figure 1: FAO monthly nominal food price index, December 2019–August 2022 Jan 2020 Apr Jul Oct Jan 2021 Apr Jul Oct Jan 2022 Apr Jul 50 100 150 200 250 Food Price Index Meat Dairy Cereals Oil seeds & veg. oils 2010-2011 Peak Food Price COVID lockdowns Ukraine crisis Source: FAO, Food Prices Index, accessed September 12, 2022. GLOBAL CONSEQUENCES 27 chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.foodsecurityportal.org/sites/default/files/2022-09/GRFC%202022%20MYU%20Final.pdf chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.foodsecurityportal.org/sites/default/files/2022-09/GRFC%202022%20MYU%20Final.pdf https://www.ifpri.org/blog/how-will-russias-invasion-ukraine-affect-global-food-security returning to pre-war levels. However, prices remain high by historical standards, reflecting impacts of supply disruptions and the surge in global demand for commodities during the recovery from the COVID-19-induced recession in 2021. High commodity prices alone need not pose risks to food security. Rather, it is the continuing volatility in tight markets and the degree of transmission to domestic food prices — that is, what consumers are actually pay- ing — that we should be concerned about. Food price inflation is still up in most countries. In January 2022, consumer food prices in many countries had already increased 5% to 10% over the previous year. By July, consumers in a majority of both high- and low-income countries saw purchasing power go deeper into the red as they faced food price increases of between 10% and 30% — or even more in some contexts (countries marked in purple in Figure 2). Understanding the price surge The Ukraine shock came when most agricultural commodity markets were already very tight, with wheat and maize stock-to-use ratios at levels comparable to the lows of the 2007/08 global food price crisis. Market tightness was also reflected in high price volatility, which was already high in the months leading up to the war (see IFPRI’s Excessive Price Volatility Early Warning System). As explained in our previous post on food price trends, during 2021, commodity prices rose with the uneven recovery from the COVID-19 crisis. Global demand surged, accompanied by supply disruptions related to transport and logistics bottlenecks — pushing up food, energy, and fertilizer prices as well as freight costs. Russia’s invasion of Ukraine further fueled food and fertilizer price inflation as it disrupted important supplies of wheat, maize, oil seeds, and fertilizer. Russia, meanwhile, is also a major exporter of fossil fuels, and war-related Figure 2: Consumer price inflation, October 2022 Source: Food Security Portal based on data from IMF and Trading economics Food inflation (%, y-o-y) 2 5 10 30 GLOBAL CONSEQUENCES28 https://www.ifpri.org/blog/how-will-russias-invasion-ukraine-affect-global-food-security https://www.ifpri.org/blog/how-will-russias-invasion-ukraine-affect-global-food-security https://www.foodsecurityportal.org/node/1913 https://www.cgiar.org/news-events/news/covid-19-and-rising-global-food-prices-whats-really-happening/ sanctions imposed on those exports pushed up the cost of nitrogen-based fertilizer production, which uses natural gas as a major feedstock and energy source. Fertilizer prices rose sharply. In response to the crisis, many staple-food-producing countries introduced bans and other restrictions on exports, especially of wheat and vegetable oils, in efforts to keep food prices down for their own consumers, but — by reducing global supplies — pushing up prices for everybody else. By the end of April, 17% of globally traded staple foods (expressed in calories) were subject to such restrictions, according to IFPRI’s Food and Fertilizer Trade Restrictions Tracker. Freight costs had surged during 2021 but dropped dramatically toward the end of the year, easing global supply chain disruptions. Then they surged again as the war triggered new supply disruptions and uncertain- ties. The Baltic Dry Index, a key indicator of freight cost for food and fertilizer trade, roughly doubled between February and May 2022 (Figure 3). Some observers are blaming market concentration and speculation as a factor driving up prices in global food (and fertilizer) markets. However, while many grain companies saw profits soar in the first half of 2022, it is less obvious that these companies have been driving the surge in prices. Figure 3: Baltic Dry Index of international bulk shipping costs, December 2019–August 2022 Jan 2020 Apr Jul Oct Jan 2021 Apr Jul Oct Jan 2022 Apr Jul 0 1,000 2,000 3,000 4,000 5,000 6,000 COVID lockdowns Invasion of Ukraine Note: The Baltic Dry Index (BDI) is an index of average prices paid for the transport of dry bulk materials across more than 20 routes. Source: The Baltic Exchange. Accessed September 12, 2022 GLOBAL CONSEQUENCES 29 https://www.foodsecurityportal.org/tools/COVID-19-food-trade-policy-tracker https://www.foodsecurityportal.org/tools/COVID-19-food-trade-policy-tracker What goes up…. The more recent price declines are most notable for wheat and maize, while rice prices have remained relatively flat, and international prices for meat and dairy are still on a moderate upward trend. While prices of cereals have come down in recent months, they are still up from a year ago and remain well above pre-COVID-19 levels. The recent decline in international prices can be explained by several factors: • Global growth has slowed as the recovery from the COVID-19 recession has faded and new lockdowns have slowed China’s economic growth. Commodity prices, including those for food and energy, eased with weaker global demand. • Seasonal factors are also playing a role, with harvests for winter wheat and maize taking place during June–August, expanding supplies. • The stronger US dollar has softened dollar prices of internationally traded commodities. • A number of countries lifted or reduced export restrictions. Between May and August, the share of global cereal and vegetable oils trade subject to restrictions dropped from 17% to 7% of trade. • Freight costs dropped with weaker global demand, resuming the downward trend that began shortly before the Ukraine crisis. • The Black Sea Grain Initiative agreements, reached in July, allowed shipments to resume from three of seven major ports in Ukraine, lifting the country’s monthly exports of wheat, maize, and sunflower seeds to about 3 million metric tons per month. While encouraging, these levels are still less than 50% of the volumes typically shipped out of the Black Sea at this time of year. Thus, the actual impact on global market prices remains limited, as Ukraine would need to export at least 7 million tons per month to free up enough space in silos and ships to export the incoming harvests (arriving in August for wheat and in October for maize). On the other hand, however, Russian wheat exports appear less hampered by sanc- tions than originally feared. But we’re not out of the woods yet. International food prices remain high by historical standards, markets remain tight, and high price volatility continues — especially for wheat and maize. At the same time, the war continues with no end in sight. There are signs already that Ukrainian farmers are likely to plant far less wheat this fall. The war and sanctions have kept fertilizer prices volatile, and fertilizer costs have risen faster than agricultural output prices. In August, energy prices rose as Russia cut off supplies of nat- ural gas through pipelines to Central and Western Europe — also leading to a halt to nitrogen-based fertilizer production by several European producers, further pushing up fertilizer costs. Another factor is poor weather conditions. Hot and dry conditions are affecting early development of wheat in Argentina and maize harvests in the United States, China, and Europe (AMIS, September 2022). In addition, rice prices increased during August and September, driven in part by extreme weather in some major rice producing countries, including catastrophic floods in Pakistan, the world’s fourth largest exporter of rice. (High fertilizer prices and India’s recent restrictions on rice exports have also contributed.) Amid this uncertainty, the risk of new price shocks remains high. Further problems with Ukraine production and shipments or any other geopolitical or weather shocks could trigger price surges. According to the World Bank’s April 2022 Commodity Markets Outlook, the war has altered global patterns of trade, production, and consumption of commodities in ways that will keep prices at historically high levels through at least the end of 2024, exacerbating inflation and food insecurity. GLOBAL CONSEQUENCES30 chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.amis-outlook.org/fileadmin/user_upload/amis/docs/AMIS_webinar_on_Ukraine_grains/AMIS_webinar_Ukraine_grain_19072022_Karavaytsev.pdf https://latifundist.com/en/novosti/59894-v-ukrayini-ochikuyut-zasiyati-65-vid-torishnoyi-ploshchi-ozimini--markiyan-dmitrasevich https://www.reuters.com/world/india/india-imposes-20-duty-rice-exports-various-grades-2022-09-08/ chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://openknowledge.worldbank.org/server/api/core/bitstreams/da0196b9-6f9c-5d28-b77c-31a936d5098f/content https://www.worldbank.org/en/topic/agriculture/brief/food-security-update Food security remains at risk These threats to food security remain acute in many countries. Food price inflation has accelerated across the globe. Fertilizer prices are rising faster than farm output prices, eroding farmer incomes. Surging domestic food and energy prices are drivers of general consumer price inflation around the world, as a recent IMF assessment points out. As a result of these trends, domestic food prices have not followed the downturn in international prices. Relative to the world market price, the average domestic price of wheat, for instance, rose by almost 20% between April–May and July. These pressures are disproportionately affecting the poor, who spend most of their incomes on food, energy, and other basic needs. The poor in food-importing low-income countries tend to be hit hardest. Many of those countries are facing a perfect storm of overlapping crises and shocks that have eroded their already weak capacity to insulate their vulnerable populations from the worst impacts. First, the global COVID-19 recession reduced livelihoods in general, and policy responses during 2020 erod- ed both fiscal space and foreign exchange. To fill fiscal and balance-of-payments gaps, countries ran up their external debt; the resulting overhang is now impeding further fiscal responses and import capacity that could mitigate the impacts of rising prices. The recent shocks have further weakened affected countries’ currencies, exacerbating the domestic cost of the international price shocks. Figure 4: Rise in cost of basic food basket in 45 food crisis countries % change in cost of food basket (Apr–Jun 2022 vs. 5-year average for that period) Note: The price of a typical food basket is based on meeting a population’s energy and nutrition requirements. Its size and composition varies according to local preferences, demographic profile, activity levels, climatic conditions, etc. Data for Bangladesh refer to Cox's Bazar. Source: WFP Global Market Monitor, August 2022; and FSIN, Global Report on Food Crises 2022 (mid-year update) < 3 3–10 10–25 25–100 ≥ 100 GLOBAL CONSEQUENCES 31 https://www.imf.org/en/Blogs As the recent update of the Global Report on Food Crises points out, countries that were already facing pro- tracted food crises before COVID-19 and the Russia-Ukraine war have been among the hardest hit by recent problems (Figure 4). Populations in all 45 countries and territories already in food crisis before the war started had seen the cost of a basic food basket increase by at least 10% by April–June 2022 above the five-year average cost for that period). People in Sudan, South Sudan, Syria, Zimbabwe, Ethiopia, Yemen, Sierra Leone, Haiti, and Honduras faced a food cost increase of over 75%. Most food crisis countries have high food import dependence and weak capacity to insulate their populations against imported food inflation due to low foreign currency reserves and/or depreciating national currency. Thus, they lack the capacity to expand social protection and other means to support vulnerable populations. In addition, many are witnessing high general price inflation, further eroding purchasing power. Protracted civil strife and weather shocks have compounded the economic woes in many of these countries, such that the total number of people facing crisis-level or worse acute food insecurity increased from 155 million in 2020 to 193 million in 2021 and to 205 million–223 million by mid-2022, according to the Global Report. The global food crisis clearly is not over yet. The most vulnerable people continue to be hurt by sharply increas- ing food costs, seeing little relief even as global prices have fallen. While immediate humanitarian assistance will be necessary to avert more widespread famine, governments and international organizations should also focus on promoting major investments in more resilient and shock-proof food systems. This will require un- precedented international cooperation to address the consequences of unstable global commodity markets and climate-change-driven extreme weather. GLOBAL CONSEQUENCES32 https://www.foodsecurityportal.org/resources?topic=25 https://www.foodsecurityportal.org/resources?topic=25 6The impact of the Ukraine crisis on the global vegetable oil market Joseph Glauber, David Laborde, and Abdullah Mamun Originally published May 3, 2022. The war in Ukraine has pushed prices of agricultural products to historically high levels, and concerns about global food security occupy headlines and world leaders’ minds, as demonstrated by recent International Monetary Fund and World Bank meetings. So far, much of the attention has focused on grains, particularly wheat — because of its importance in diets, and the predicament of countries where wheat accounts for a large share of calories consumed, is largely imported, and is dominated by supplies from the Black Sea. Here, we focus on another important emerging food security issue: The war’s impact on vegetable oils. The Black Sea countries are large exporters of sunflower oil, and the crisis has pushed vegetable oil prices significantly higher, and also triggered trade policy responses around the world that further restrict supplies and raise prices. This post examines the unfolding impacts on the global market for vegetable oils, including additional factors affecting prices such as biofuel policies and export restrictions in the Black Sea and elsewhere. Vegetable oils are a key item in diets around the world and an essential source of fats, accounting for about 10% of daily caloric food supply (300 kcal per day per person), making them the second-most important food group after cereals. Vegetable oils are also a nutritional source of omega-3 and omega-6 fatty acids and vita- mins E and K. Vegetable oils are, of course, an essential cooking item, particularly for poor consumers unable to shift to more expensive butter or other animal fat–based products. As with a number of other commodities, prices for many vegetable oils were at very high levels prior to the invasion in February. Since then, vegetable oil prices have risen by almost 30% on average (see Figure 1). Sunflower oil has been most directly affected with an increase of more than 40% since the day of the invasion. It accounts for about 13% of vegetable oils traded in global markets, and Ukraine and Russia account for about 50% and 25%, respectively, of the sunflower oil traded in the world. Since vegetable oils require little or no processing, high prices have already been passed through to consumers, and some retail shortages have been reported. An overview of the vegetable oil market Vegetable oils are heavily traded, with imports representing about 40% of global consumption, especially when compared to other commodities, for example, less than 20% for grains. Three-quarters of countries (Figure 2) depend on world markets for at least half of their domestic needs. As a result, most countries are more exposed to vegetable oil export shocks compared to cereals, which are less traded and in which many countries are relatively self-sufficient. Together, palm oil (58%), soybean oil (14%), sunflower oil (13%), and rapeseed (canola) oil (7%) account for GLOBAL CONSEQUENCES 33 https://www.worldbank.org/en/news/statement/2022/04/13/joint-statement-the-heads-of-the-world-bank-group-imf-wfp-and-wto-call-for-urgent-coordinated-action-on-food-security https://www.worldbank.org/en/news/statement/2022/04/13/joint-statement-the-heads-of-the-world-bank-group-imf-wfp-and-wto-call-for-urgent-coordinated-action-on-food-security https://www.fao.org/faostat/en/#data/FBS chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.fediol.eu/data/FEDIOL%20factsheet%20Veg%20Oils%20%26Fats%20in%20a%20Balanced%20Diet%205Dec%20final.pdf https://www.nytimes.com/2022/04/30/world/europe/cooking-oil-shortage-ukraine.html https://www.nytimes.com/2022/04/30/world/europe/cooking-oil-shortage-ukraine.html 92% of vegetable oils traded in world markets on average between 2019 and 2021. The remaining 8% includes diverse, locally important oils such as olive oil, cottonseed oil, peanut oil, safflower oil, and palm kernel oil. Indonesia and Malaysia accounted for 92% of total palm oil exports over the 2019–2021 period. Major soybean oil exporters include Argentina (46% of global exports over the period), Brazil (10%), the European Union (8%), and the United States (8%). Canada is the major exporter of rapeseed (canola) oil, accounting for 58% of rape- seed oil exports, but Russia (13%), the European Union (8%), and Belarus (7%) are also important exporters. Prior to the Russian invasion of Ukraine, global vegetable oil supplies had tightened due to a variety of factors. Drought in South America has caused a sharp reduction in soybean yields, particularly for its largest producer, Brazil. As a result, soybean exports for Argentina, Brazil, and Paraguay are forecast to decline by 5% from last year’s levels and vegetable oil exports are estimated to be largely unchanged. Malaysian palm production declined due to the impacts of Typhoon Rai in December 2021 and continuing acute labor shortages and Jan 2021 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan 2022 Feb Mar Apr May 0 200 400 600 800 1000 1200 1400 1600 1800 2000 2200 Palm oil, Crude Rapeseed oil Soybean oil Sunflower oil 2200 1714 1880 2244 Russian invasion of Ukraine Note: Soybean oil: CBOT, Palm Oil, crude: Malaysian Board daily price, Rapeseed Oil: Rotterdam spot prices, Sunflower oil: India CIF Mumbai price Source: MPOB, Bloomberg, CBOT Figure 1: Daily vegetable oil prices, current US dollars GLOBAL CONSEQUENCES34 chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://apps.fas.usda.gov/newgainapi/api/Report/DownloadReportByFileName?fileName=Oilseeds%20and%20Products%20Update_Brasilia_Brazil_01-31-2022 https://apps.fas.usda.gov/psdonline/app/index.html#/app/advQuery https://apps.fas.usda.gov/psdonline/app/index.html#/app/advQuery chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://apps.fas.usda.gov/newgainapi/api/Report/DownloadReportByFileName?fileName=Oilseeds%20and%20Products%20Update_Kuala%20Lumpur_Malaysia_12-31-2021 chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://apps.