War in Ukraine is driving up food prices in those countries that depend on Black Sea grains and oils

Agriculture ministers from the United States, Canada, United Kingdom, Japan and other leading nations are set to discuss the brewing crisis in a virtual meeting hosted Friday by Germany, but there are no easy solutions.

While Russia’s invasion of Ukraine has similarly sparked an energy crisis, there are efforts underway to boost oil production. But boosting wheat production or corn production is quite complicated, particularly as nearly a third of the world’s wheat exports come from Russia and Ukraine.

As global agricultural prices were already reaching an all-time high due to covid and extreme weather from climate change, the knock-on effects of the Russian war are sending prices soaring for bread, animal feed and fertilizer for nearly all crops.

So far, Turkey and Egypt have experienced the biggest disruptions in agricultural deliveries, experts say. Turkey processes wheat and sunflower seeds to produce pasta, flour, oil and other foods, and sells these products to countries in the Middle East and Africa, so countries buying products from them will soon also be affected, and many of them are already food insecure .

Food prices are expected to continue to rise if the conflict continues through Europe’s key planting season in spring and beyond.

Before the invasion, it was assumed that about 24 million tons of wheat sown last fall would be shipped out of Ukraine starting in the summer, said Joe Glauber, senior research fellow at the International Food Policy Research Institute in Washington and former USDA chief economist. The USDA has downgraded that to 20 million, but Glauber said he has heard it could be as little as 6 or 7 million, “with Russia cutting most of the rail lines down from the main wheat-producing areas to the port, to Odessa and on that side of Crimea.”

While two-thirds of the Russian wheat and barley had already been exported, the remaining is in storage facilities inland and at ports, with some already loaded on ships, according to Rabobank, a Dutch banking firm. Currently in the Azov Sea, there are 30 ships loaded with wheat and sunflower seeds that were expected to sail for Turkey, said Erkut Sonmez, a professor of supply chain management at the University of Nebraska at Lincoln. They cannot sail, since Russia has banned trade ships in the Azov Sea, although Turkey’s leaders have made appeals.

Egypt has government subsidies and can buy wheat from alternative sources to cushion the blow, but smaller countries such as Lebanon are in a more delicate situation, said Glauber with the Food Policy Research Institute. He said Lebanon is a “huge wheat importer.”

“They import a lot of wheat from Ukraine or Russia, but they also import a lot of flour. Where is the flour milled? It’s milled in Egypt, Turkey and the Arab Emirates. And where do they get their wheat? They get it from the Black Sea,” Glauber said. “There are a lot of knock-on effects that I think don’t show up immediately that we’re beginning to uncover.”

And for sunflower seeds and oil, Ukraine’s most famous crop, there still could be significant disruption of the flow of last year’s crop, he added. This year’s crop has yet to be planted.

“We have an idea where all the grain elevators are in the country, but we have no idea what’s in them,” Glauber said. “And it’s unclear what condition the mills are in and whether or not there’s labor there to actually operate them.”

The Black Sea is the major thoroughfare in this area connecting Ukraine, Georgia and parts of Russia with Bulgaria and Turkey. Ships are not coming in or going out on the Black Sea because of security or because of prohibitive insurance costs.

That unmet demand will put pressure on Australia, Canada and the United States to export more of their commodities, with greater demand driving all prices higher.

“Someone has to absorb that cost, either in terms of governments subsidizing consumers, or consumers absorbing it themselves,” Glauber said. “And I think the lessons from Arab Spring are that you have to do what you can to keep food prices at reasonable levels in a lot of those countries.”

Also, the cost of fertilizer, which is produced from gas, has risen with energy prices. Russia, the world’s biggest producer of nitrogen fertilizer, is urging its producers to halt fertilizer exports, reducing already constrained supplies and pushing up costs further, with the effect of potentially impacting crop yields in countries around the world.

The disruption of supplies of cereals, oilseeds and other commodities that are shipped along the Black Sea region will have significant implications for food security in those countries that are net importers of commodities, and especially those in North Africa and the Mediterranean region that are highly dependent on such imports from Ukraine, said Alan Matthews, a retired professor of European agricultural policy at Trinity College Dublin in Ireland.

Ukraine was the second-largest supplier of wheat to the United Nations World Food Program in 2020 and 2021. The nonprofit is now purchasing grain from other, more expensive sources and has less aid to provide. The nonprofit is spending $70 million more each month to deliver the same amount of food aid that it did in 2019 before the pandemic, said Arif Husain, his chief economist.

“The consequences of this conflict are significant for poor countries. What I’m concerned about is the hundreds of millions of people who spend more than 50 percent of their income on food on a good day,” Husain said.

Experts contend that one of the driving forces behind the Arab Spring in 2011, when citizens in Tunisia, Egypt and Libya overthrew their dictatorial governments, was in part out of frustrations about high food costs when wheat prices spiked due to drought and poor harvests.

Husain said that “while we’ve been here before,” the Russian conflict creates a situation for many poor countries that is worse than in 2008 or 2011.

“Why? Because in 2008 we didn’t have covid and we didn’t have wars in Yemen, Syria, Ethiopia and conflict in Northeast Nigeria. All of these things play a big role in terms of the vulnerability created by an unnecessary war,” he said. “There were already bread lines in Sudan and elsewhere before this was happening. Everyone says it’s going to be worse than 2008 and 2011, but there are uncertainties, like how long will this disaster last? If there is no planting or harvesting, this pain is going to be even worse.”

Many countries, including Egypt, Turkey and Kenya, are also dealing with political instability and conflict, situations only made worse when populations go hungry.

“It’s looking more and more like there will be a long-term disruption of wheat supply,” said RJ Reinhart, an analyst for Gallup. “That will have huge impacts on the streets of Cairo. We can’t definitely say it will cause something like the Arab Spring, but it adds a level of stress.”

Leave a Comment