The war in Ukraine, in addition to raising fuel prices in continental Europe, has led to a dramatic increase in food prices. Rising prices have led some farmers to abandon planting seasonal crops. One of the main reasons for the shortages and rising prices is that Russia is one of the largest producers of chemical fertilisers in the world. Last year, it exported the highest volume of nitrogen fertilisers and was the second country in the world to supply and distribute potassium and phosphorus fertilisers. Russia is one of the largest producers of raw materials used in the production of fertilisers. If trade sanctions against Russia are imposed in response to the Ukraine invasion, the supply of these raw materials for fertiliser production will be interrupted and prices will rise. Agricultural product shortages and increased hunger and poverty in the world will continue.
World Food System at Risk
The world food system is under threat as Russia’s invasion of Ukraine is hindering the situation in one of the world’s largest agriculturally productive areas. The latest developments and their effects can be the following.
Food Inflation
The Ukraine war is affecting Europe’s main grain-producing region, which means further food price rises around the world and an escalating hunger crisis. The United Nations has warned that food prices will rise another 20% due to disruptions in trade and shortages in future harvests. Wheat, corn and rice make up more than 40% of the world’s calories. Rising prices of transportation, energy inflation, climate change and labour shortages have made production more difficult. The Ukraine war will raise prices and take hunger to unprecedented levels.
Domestic Production Protection Policy
Governments have taken steps to keep food supplies at home, which will prolong food inflation. Hungary, Indonesia and Argentina are among the countries who have restricted exports of agricultural products, ranging from wheat to cooking oil, in an effort to curb domestic prices and support domestic food supplies following Russia’s invasion of Ukraine and fears of food shortages. Russia has exacerbated the situation by announcing its plan to restrict trade in some raw materials.
Everything related to food production has become more expensive. Russia as a major supplier of agricultural fertilisers has forced domestic producers to reduce exports. Therefore, concerns over the shortage of this product have risen among farmers. Russia’s move destabilises world markets. Brazilian farmers, the world’s largest importers of fertilisers, are already struggling to obtain this. Russian President Vladimir Putin has announced that his country will supply agricultural fertilisers only to countries who have friendly relations with Russia.
The price of fuel needed by farmers to heat warehouses and set up agricultural equipment to produce food is also rising.
The Russia-Ukraine war has a very wide range of negative effects. In addition to producing energy and minerals in the world, these countries are also the largest exporters of agricultural products and therefore have an impact on the agricultural market. Statistics show that since the beginning of the Russia-Ukraine war, world prices for cereals and vegetable oils have risen by 30-42%. According to a new executive order issued by Vladimir Putin, the price of these agricultural products is likely to continue rising.
EU Farmers at Risk
“Shortages and rising prices will first have a direct financial impact on farmer incomes and expenditures, and will greatly increase production costs,” said a Belgian farmer. Another problem, he said, is that less access to chemical fertilisers could lead to “fewer crops being produced in the future and Europe facing a serious crisis in this area.” “Fertiliser prices have risen to an all-time high in recent weeks. Whereas last year we paid 150 to 200 euros for each tonne of agricultural product for fertiliser, today we have to pay more than 800 euros for this one tonne … Apart from this, we are witnessing a severe shortage of chemical fertiliser distributions.”
“The price of all the goods a farmer needs has risen so much that European farmers are unlikely to be able to make up for it any time soon,” said the Belgian farmer who owns tens of hectares of land for grain, corn and beet production, as well as 250 cows and 600 goats. “Let them die.” Another problem is the lack of basic goods needed by these farmers. It is not without reason that Europe has witnessed widespread protests and strikes by farmers and livestock owners in recent days, including Spain and Greece. Greek farmers have been gathering in front of the Ministry of Agriculture for more than a week.
Transport in the Black Sea
Grain-carrying vessels dodge the Azov’s Sea, a waterway between Russia and Ukraine that connects to the Black Sea. The Russian invasion initially disrupted the world’s supply of wheat and vegetable oils as maritime transport in the region was halted. Fears of crew safety and insurance costs have led shipping companies to refuse to ship to Russia and Ukraine. Russia and Ukraine together account for a quarter of the world’s wheat trade and a fifth of the world’s corn sales.
Putin’s Threatening Announcement
The Russian president has announced that the import of a number of products from Russia will be banned because these products are needed domestically. Although no detailed information has been provided about these products, it is expected that agricultural products will be in this category. This has brought a new shock to the market; a shock that could pose new challenges to the economy. “The start of the Russia-Ukraine war has pushed up the price of energy because Russia is one of the largest owners of energy reserves in the world,” the Financial Times reported.
But in addition to the energy market, the food and agricultural market also changed as a result of the crisis. Russia and Ukraine together account for half of the world’s wheat exports.
Ukraine also exports 50% of the world’s sunflower oil. If the war disrupts the cultivation or harvesting of agricultural products in Russia and Ukraine or damages large farms, the shortage of supply could pave the way for rising prices and once again worsen the economic crisis in the world. But we can still expect an increase in the price of these products if they are also on the list of prohibited goods for export from Russia.
Studies show that Turkey and Egypt import about 70% of their grain needs from Russia and Ukraine. If there is a disruption in the supply of these products, the flow of food and agricultural products to these two countries will be interrupted.
Another important food produced in Ukraine is corn. China is one of its largest importers. Last year, Ukraine was the largest exporter of corn to China, supplying a large share of the country’s needs. Ukraine’s failure to supply corn to China will pose a major challenge to the vast Asian economy.
Conclusion
Can increasing the area under agricultural cultivation in other countries alleviate some of the problems caused by the Russia-Ukraine war? The fact is that the burden of this problem is simply not bearable. Russia is one of the largest producers of raw materials used in the production of fertilisers, and if trade sanctions against Russia are imposed in response to the Russia-Ukraine war, the supply of these raw materials for fertiliser production will be interrupted and prices will rise. Agricultural products and increasing hunger and poverty in the world will continue.
The European Union intends to do its utmost to ensure that the war in Ukraine has the least impact on the continent’s economy, especially the production of basic necessities for European citizens. But analysts say the consequences of the war in Ukraine are far more severe than expected, and that Europe could face a widespread economic crisis this summer.
