Huge relief as Ukrainian grain shipped out, but the food crisis isn’t going anywhere

CNN, CNNBUSINESS

By Tara John and Angela Dewan, CNN

As the Razoni left the Ukrainian port of Odesa on Monday with the first shipment of grain since the early days of Russia’s war in Ukraine, there were sighs of relief from Somalia to Turkey, Indonesia and China, given how reliant these countries have been on Ukrainian grain to meet their daily needs.

Millions of people have been pushed into hunger as the Russian blockade fueled soaring grain commodity prices, which reached record highs this year as more than 20 million metric tons of Ukrainian wheat and corn remained trapped in Odesa.

But even as the UN-brokered agreement to lift the blockade has eased grain prices, experts say the belated shipments from Ukraine are no quick fix to the crisis, accelerated by years of pandemic-related disruptions, the climate crisis, conflict, food export restrictions and spiraling costs.

All these interacting factors “are going to remain for some time,” Laura Wellesley, a senior research fellow at think tank Chatham House’s environment and society program, told CNN. “It may be that we see peaks in food prices again, and peaks in food insecurity, but certainly not a resolution of the situation anytime soon.”

Global hunger has increased massively, from 135 million people acutely food insecure in 2019 to 345 million in 2022, according to the World Food Programme (WFP). It includes “50 million people in 45 countries that are knocking on famine’s door,” David Beasley, WFP’s executive director, told the House Foreign Affairs Committee on July 20, as he called on other donor countries, like Gulf nations, to step in an “avert catastrophe.”

Today’s crisis is far worse than the previous food price spikes of 2007 to 2008 and 2010 to 2012, which both fueled riots around the world, including revolutions in the Middle East.

Food security experts have warned of huge geopolitical risk if action is not taken. This year has already witnessed political destabilization in “Sri Lanka, Mali, Chad, Burkina Faso, riots and protests taking place in Kenya, Peru, Pakistan, Indonesia … these are only signs things to come is going to get worse,” Beasley said.

Hunger hotspots

In the Horn of Africa, a four-year drought has led to food insecurity and starvation, according to aid groups. Somalian health facilities are seeing record levels of malnutrition following years of failed rainy seasons, a doubling of wheat prices and the economic fallout of the Covid-19 pandemic.

Ijabu Hassan lost three children to malnutrition this year, telling CNN that her 2-year-old daughter collapsed and died on their trek to the capital, Mogadishu, to seek help.

“I cried so much,” she said, “I lost consciousness.”

As desperate parents like Hassan seek reprieve, the UN estimates 7 million people — or over half of Somalia’s population — simply do not have enough to eat.

Meanwhile, Afghans have seen their lives go from bad to worse since the Taliban seized power in 2021. After the United States’ hasty withdrawal from the country last August, Washington and its allies cut off international funding to the country, which has run heavily on aid for years, and froze about $7 billion of the country’s foreign reserves.

Afghanistan’s economic crisis has loomed for years, the result of poverty, conflict and drought. But this year, as below average harvests led to unprecedented levels of hunger across the country, long lines for aid have become ubiquitous even in the capital Kabul’s middle-class neighborhoods.

Longstanding conflict in countries like Somalia and Afghanistan has impacted people’s ability to access food, and the climate crisis is only worsening the situation. Droughts in main crop-producing regions, like Europe and North America, have pushed food prices upwards.

Extreme weather across parts of North Africa is a chilling reminder that, blockade or no blockade, food supply here is highly insecure anyway. The region is dependent on wheat from Europe, especially Ukraine. Tunisia, for example, gets nearly half its wheat from the country to make its daily bread.

Data from EarthDaily Analytics, obtained using satellite imagery, shows just how hard it is for some nations here to cover any of the gap themselves. Looking at crop cover in Morocco, the images suggest a “catastrophic wheat season” in the country, with output far lower than in recent years, because of a drought that began there at the end of 2021 and continued into early this year.

Morocco gets a fifth of its wheat from Ukraine and a larger 40% from France, according to Mickael Attia, crop analyst for EarthDaily Analytics.

“The current drought in North Africa, specifically Morocco, is profoundly impacting their ability to produce their own crops, not to mention that in the past, Ukraine was one of the largest exporters of food to the country. The cost to replace that is very high and a struggle,” Attia told CNN.

“The country needs the import for structural reasons — every year national consumption is far higher than production — and because the country is regularly exposed to massive weather events, drought and climate change will make things worse in the future.”

Ukraine’s wheat production, too, is expected to be 40% lower than last year’s, as its fields are impacted by the war; fertilizer and pesticides are harder to get; but also because of an early spring cold pattern and dryness in the country’s west, Attia said, adding that the impacts could last well into next year.

“If Ukrainian grains are partially, physically missing because of low production and difficulties in exporting then, this will lead to greater food insecurity this year and next,” he said.

Other major wheat exporters have also been hit hard by extreme weather exacerbated by climate change. France too should produce 8% less wheat than last year, Attia said.

“May was dry in most of Europe, and crazy hot in Western Europe, impacting crops from France and Spain, especially,” Attia said. “June was also a dry and hot month in most of Europe, and accelerated the decrease in crops in France, Spain and Romania.”

Pandemic and protectionism

Meanwhile, many countries’ efforts to alleviate food insecurity were undone in the pandemic. It plunged the global economy into recession in 2020, upending supply chains and causing employment and transport problems. Governments began to face inflationary pressure and global food prices began to soar as production disruption and high demand from countries like China were “really tightening that balance between supply and demand and pushing up prices,” said Wellesley, from Chatham House.

Economies of poorer countries have been left in tatters while middle income nations have incurred large debts, limiting their governments’ ability to offer social safety nets and provisions that would help the most vulnerable through this food supply crisis, she added.

In Peru and Brazil, people working in the large informal jobs sector lost their savings and earning power during the pandemic’s lockdowns. “So these people moved from middle classes to poor… in Brazil the number of people living in severe food insecurity is extremely high,” Maximo Torero, the chief economist of the Food and Agriculture Organization (FAO), told CNN.

In 2021, a record 36% of Brazilians were at risk of going hungry, surpassing the world average for the first time, according to the Getulio Vargas Foundation (FGV), a Brazilian academic institution, which analyzed Gallup data.

The war has brought home just how many people and countries have come to rely on a complex and globalized commodities system. Europe’s dependency on Russian gas has exposed its vulnerabilities. While countries like Turkey, Egypt, Somalia, Congo and Tanzania are some of the most dependent on Ukrainian and Russian wheat, nations like Eritrea bought the grain exclusively from the two nations in 2021.

Analysts suggest the supply chain crisis might lead to more localized or regional sourcing strategies — but that might take a while.

“Let me give you an example — Africa uses 3% of the fertilizers in the world,” Torero said, yet Dangote’s fertilizer plant in Nigeria sends 95.5% of its product to Latin America. “Nothing stays in Africa. It is not that (the) Dangote plant does not want to export in Africa, it’s (because) there are too many barriers to export (to other parts of) Africa,” he said, adding that the infrastructure was poor and the risk high.

Going the other way and imposing protectionist policies is also problematic. As food prices exploded following Russia’s invasion, countries began restricting exports. India, the world’s largest producer of sugar, limited sugar exports to 10 million tons and banned wheat exports. Today, more than 20 countries have some sort of export restrictions in place, dashing hopes that these items might help alleviate hunger elsewhere.

“That has an immediate effect of pushing up prices, but over time, it also is kind of eroding trust and predictability in the global market,” Wellesley said.

Then there is the issue of fertilizer prices that remain high because it is energy intensive to produce and Russia and Ukraine are major suppliers of its key components: urea, potash and phosphate.

Some analysts warn that as usage of fertilizer goes down, we will see smaller yields in 2023. And while the main concern has rested on grain supplies, some worry that the production of rice, a cornerstone of many diets in Asia and sub-Saharan Africa, could take a hit amid high fertilizer costs.

Even if there are currently high inventories of rice, protectionism and people turning to rice as a substitute for wheat could impact prices. “Sub-Saharan Africa imports the most rice in the world, so if the price of rice goes up, then the most vulnerable countries will be substantially affected,” Torero of the FAO said.

The Razoni, a Sierre Leone-registered ship currently en route to Lebanon, is carrying around 26,500 metric tons of corn. “To meet 2021 August shipment levels, we’d have to see seven of those ships happen every single day for things to actually get back to where we were,” Jonathan Haines, a senior analyst at commodity data group Gro Intelligence, told CNN. There is a lot of uncertainty if that can happen, but flow is undoubtably “going to really pick up,” he added.

The Ukrainian government and the Turkish Defense Ministry said three more ships were expected to leave Ukrainian Black Sea ports on Friday laden with grain.

As and when wheat prices drop to pre-war levels, Torero worries that the return of Ukrainian and Russian grain on the markets could further reduce wheat prices and in the process impoverish poor farmers, who shouldered high fertilizer and energy costs to plant their crops.

Just as the food crisis has had wide and varying impacts on people, the solutions are complex and multifaceted. These include improvements in how fertilizers are used, investments in social safety nets, decoupling food production from fossil fuel dependence while slashing greenhouse gas emissions, and a push to make the agricultural sector more resilient to global shocks by diversifying production and trade relationships, experts say.

“These all seem like things to tackle another day given the severity of the current situation. They are not,” Wellesley said. “They are problems contributing to today’s situation (and) will recur over the years to come — particularly as climate impacts continue to worsen.”

The-CNN-Wire
™ & © 2022 Cable News Network, Inc., a WarnerMedia Company. All rights reserved.