Russia and Ukraine provide about one-third of the world’s wheat supply. Of this, Ukraine provides about 10 percent. In addition, 80 percent of soybeans are supplied by the two warring countries. Many countries in Africa and the Middle East depend on millions of tons of grain exported by Russia and Ukraine. Many Asian countries also import food grains from both countries.
But the Russian Navy blockaded Ukraine’s Black Sea ports, halting exports. In addition to this blockade of the Black Sea, Western sanctions imposed on Russia are responsible for the global food crisis.
The entire world is already suffering from food insecurity due to the current blockade in Ukraine and some countries stockpiling grain. Drought in Africa has already taken dire shape. The continent has not seen much rain during four consecutive monsoons. The number of hungry people in the area is expected to reach 20 million by the end of the year. Maximo Torrero, the chief economist of the United Nations Food and Agriculture Organization, said that Russia is the first among the top wheat exporting countries. And Ukraine is in the fifth position. Europe is the main market for grain produced in these two countries. Due to the war, the cost of crop production is increasing along with the price of fuel oil.
Due to the suspension of exports from both the countries, the stored products are also affected. It has disrupted supply systems around the world. According to US financial institutions JP Morgan and S&P, Russia and Ukraine supplied 60 percent of the world’s soybeans and about 30 percent of wheat exports before the war. Grain and oilseed supply from Ukraine have fallen by 80 percent during the war, which is equivalent to more than 10 days of world food shortages if considered as a year’s supply.
Worryingly, Russia supplies 25 percent of global fertilizer production, which is now blocked by Western sanctions. It is also affecting global agricultural production. For this reason, it is not a war-torn country in Africa or the Middle East; There is a severe fear of food shortage in the whole world. The Food and Agriculture Organization of the United Nations (FAO) has expressed such concerns. The organization says that the Russia-Ukraine war has destroyed the grain production and export infrastructure of the two countries, which are the top suppliers of wheat and corn. This could increase global food prices by up to 20 percent, the effects of which are already beginning to be felt globally.
The World Bank has warned that the world commodity market is going to have the biggest shock in 50 years due to the Ukraine war. Russia’s military campaign in Ukraine has pushed up prices of commodities ranging from gas to wheat and cotton, and the shock could reach the highest level since the 1970s, the agency forecast. Recently, the United Nations and the World Bank have said in two separate reports that due to the negative response to the Corona epidemic, the world is currently on the verge of a severe economic and food crisis, which no one has seen in the last few decades. The United Nations has warned governments around the world about this.
Meanwhile, the overall global economy has fallen into a deep recession not seen since World War II. Most worrisome will be the impact of the Russia-Ukraine war on global agriculture. Greater Russia is a major supplier of natural gas and fertilizers. It will also affect the agricultural production of countries that import fertilizers from Russia. Experts believe that this will have a negative impact on global food grain production in the coming days.
Denying the accusations of the Western countries, Russia says that the whole world is suffering from food shortage due to the embargo of the Western world. Russian Foreign Minister Sergey Lavrov said that the West is responsible for the global food crisis, not Russia. An embargo has been imposed on Russian trade to exert influence in the region. The war is being deliberately prolonged. However, the Russia-Ukraine agreement on grain exports through the Black Sea is showing some hope. The two countries signed a landmark agreement to reopen Black Sea ports for grain exports.
As a result of this agreement, it is expected that the food crisis caused by the war will be reduced. The agreement was brokered by the United Nations and Turkey after two months of negotiations. Turkey is a member of NATO and has good relations with both Russia and Ukraine. Turkey also controls the straits leading to the Black Sea. At the signing ceremony of the agreement in Istanbul, UN Secretary General Antonio Guterres said that through this agreement, the way for the export of a significant amount of commercial food from three important ports of Ukraine, Odessa, Chernomorsk and Izuni, has been opened. According to the agreement, the movement of ships carrying food grains has already started.
Impact on Bangladesh
Although the impact of the global food crisis did not directly affect Bangladesh, the price of food products in the country has increased due to the effect of the Russia-Ukraine war. Especially the products that Bangladesh imports. Coupled with this are the domestic hoarders, who are ever ready to exploit excess profits by creating artificial crises by increasing stocks.
In the context of the global situation, the government has taken several decisions in terms of cost reduction and financial expenditure on power and energy consumption. As part of this, the government has reduced the fuel cost of government employees’ cars by 20 percent. At the same time, instructions have been given to spend 25 percent less of the allocation in the power sector. This decision of the government will save BDT 6524 crores in the current budget.
In addition, 50 relatively less important projects (C-category) have been suspended, 25 percent of the total cost of about 500 B-category projects have been suspended and a ban has been imposed on the purchase of all types of motor vehicles and watercraft in ministries, departments and organizations. Besides, it has been asked to spend 50 percent less on purchases of money, computer-accessories, electrical equipment and furniture, including internal training, application and travel expenses. Honorary expenses of various committees of development projects have also been completely suspended. Altogether, the initial potential government expenditure will save about BDT 50000 crore — the money that the government can spend on urgent needs for public welfare.
There is no major food shortage in Bangladesh as of July while food price inflation remains at a multiyear high in South Asian countries, the World Bank said on Thursday.
Pakistan has experienced some decreases in wheat and rice production (because of lack of fertilizer and a heat wave), and Bhutan and Sri Lanka are experiencing significant shortages in domestic food supply, according to the World Bank’s South Asia Food Security Update.
The government of Bangladesh reduced rice import tariffs, increased the budgetary allocation to agriculture, increased fertiliser subsidies, and provided a cash incentive to exporters, the World Bank said.
According to the report, food price inflation reached 8.3% in Bangladesh, 80% in Sri Lanka, and 26% in Pakistan.
The World Bank said that Bhutan is stocking essential food items directly and through concessional working capitals to wholesalers and retailers while the government of Pakistan has been providing targeted subsidies and has increased coverage of social protection programmes to protect the poorest households from high food prices.
According to the release, agricultural production in Sri Lanka has decreased by 40% to 50% because of fertiliser shortages, and there is a lack of foreign exchange to purchase food imports.
Some relief is coming from the first shipment of 44,000 tonnes of urea supported by Indian credit (and 21,000 tonnes is expected to arrive soon).
[David Stanley from Nanaimo, Canada, CC BY 2.0, via Wikimedia Commons]
*Kamal Uddin Mazumder is a Political economy Analyst based in Dhaka, Bangladesh. The views and opinions expressed in this article are those of the author.