While the supply chain has been in a state of disruption since the start of the COVID-19 pandemic in 2020, disruptions have been exacerbated by the war between Russia and Ukraine, both major wheat exporters. This has contributed to food inflation that is hitting the most vulnerable particularly hard, according to Mercy Corps, a humanitarian organization that distributes aid to the needy worldwide. “Spiking food prices in 2022 means that the cash assistance we provide to vulnerable families is not going as far,” Tjada D’Oyen McKenna, CEO of Mercy Corps, told Insider. “The main constraint on food access is reduced purchasing power coupled with increased food prices.” Last month, Ukraine and Russia reached an agreement brokered by the United Nations and Turkey that allows Ukraine to resume grain exports from the Black Sea. The move provided some relief to global markets: The Food and Agriculture Organization of the United Nations’ Food Price Index – which tracks a basket of common commodities – fell for a fourth consecutive month in July after hitting a record high earlier in 2022. However, the price cuts are unlikely to trickle down to consumers immediately. “While many food prices have fallen in recent weeks, with some returning to pre-war levels, markets will continue to be volatile and even if global prices fall, local markets may not see price adjustments for over a year.” , McKenna said. And by then, we could see a new chapter in the food crisis that could push prices up again. Here’s how the food crisis could change – for the worse – in 2023. The story continues
This year, it’s a logistics problem. Next year, it could be a supply issue.
This year’s food crisis is mainly due to a disruption in logistics linked to issues shipping Ukrainian and Russian grain from the countries. But next year, the food supply itself could be at risk — particularly in Ukraine. Russia’s invasion of Ukraine, which began on February 24, threw a wrench into the annual agricultural cycle and interrupted the spring sowing season in April and May. Another sowing cycle takes place from September to November. In July, Ukrainian President Volodymyr Zelenskyy took to Twitter to warn that the country’s farm harvest could be cut in half this year because of the war. “Ukraine’s harvest this year threatens to double,” Zelensky tweeted. In an Aug. 17 report, consulting firm McKinsey predicted a sharp drop in harvest volumes: It estimates that production of grains in Ukraine, such as wheat, will drop by 35% to 45% next harvest. “Ongoing conflict is interfering with farmers’ ability to prepare fields, plant seeds, and protect and fertilize crops, which will likely lead to even lower volumes next harvest,” McKinsey wrote in the global food security report. amid the war in Ukraine and impacts from climate change. According to McKinsey forecasts, Ukraine’s harvest will be 30 to 44 million tons below normal levels this year. This is due to fewer plantings on an acre basis, reduced cash flow for farmers as much of their last harvest cannot be shipped and the possibility of running out of grain treatment or immunity, the consultancy said. “In the next planting season, due to Ukraine’s war-related disruption of planting and harvesting, combined with less-than-optimal crop inputs from Russia, Brazil and other developing countries, supply will likely be tight,” McKinsey wrote. The consultancy interviewed local growers and reviewed local data for its report.
Rising fertilizer prices and climate change are causing supply shocks
Russia accounted for almost a fifth of fertilizer exports in 2021, but the war in Ukraine has caused severe disruptions to the supply of nutrients to crops. Prices of urea, a common nitrogen fertilizer, have more than doubled from a year ago, according to Bloomberg’s Green Markets service. As a result, farmers around the world are using less fertilizer. “Fertilizer shortages and higher fertilizer prices are also expected to reduce yields in countries that are heavily dependent on fertilizer imports, such as Brazil. This will likely further reduce the volume of grain on the global market,” McKinsey wrote in her report. Mercy Corps has noticed the same trend. “The farmers we work with in Guatemala have not been able to invest in the next production cycle either because they cannot afford to buy fertilizers and other oil-derived inputs, such as plastics for cladding and pipes for irrigation systems, or because they cannot find agricultural inputs to market,” McKenna said. As the shocks to agriculture and supply come at a time of extreme climate conditions, including severe droughts in Europe and floods in Australia, McKinsey expects the next food crisis to be worse than those of 2007 to 2008 and since 2010 to 2011. “The conflict in Ukraine is shaking important pillars of the global food system in an already precarious context,” the consultancy said. Read the original article on Business Insider
