Russia’s February invasion of Ukraine has turned into a costly war, and not just in terms of the devastating loss of life. Because Ukraine — known as the “breadbasket of the world” — is a major producer of conventional and organic crops such as wheat, barley, sunflower oil and more, the war is causing major disruption to agriculture and commerce, and now the highest food prices the world has ever seen .
The Food and Agriculture Organization of the United Nations (FAO) warned in March that conflict in Ukraine could raise food prices by up to 20%, raising the risk of rising malnutrition and social unrest around the world. The FAO tracked the world’s most traded food commodities and reported that food prices hit their highest level on record 60 years ago, rising 13% in March after a record rise in February.
According to the UN Food Price Index released in early April, the cost of vegetable oils rose 23%, while grains rose 17%. Sugar up 7%; Meat up 5%; while dairy products, which were less affected by the war, rose 3%. Food commodity prices were at a 10-year high before the war in Ukraine due to global crop problems, the UN reported.
Russia and Ukraine alone account for 30% of world trade in wheat, 32% in barley, 17% in corn and over 50% of the world market in sunflower oil and seeds, reports The Brussels Times. In fact, the flag of Ukraine partially represents the blue sky over wheat fields. And as war has choked off supplies from Ukraine, the world’s largest exporter of sunflower oil, the cost of alternatives has risen.
Planting season interrupted in Ukraine
As the war drags on into the spring and Russia’s ongoing campaign is targeting agricultural areas in the east, there are concerns about whether Ukrainian farmers will be able to plant anything at all this year. If they get their crops into the ground, production could be limited due to shortages of seeds, fertilizers, fuel and other inputs, much of which come from besieged port cities, including Mariupol. Ukraine alone exported more than $27 billion worth of agricultural produce to the world in 2021, according to the American Farm Bureau Federation.
Jörg-Simon Immerz, head of grain trading at BayWA, Germany’s largest agricultural trading group, said: “zero grain is currently being exported from the ports of Ukraine – nothing is leaving the country.”
The longer the war goes on, the more the world’s poorest countries will suffer. Many nations in Africa and the Middle East depend on wheat imports from Russia and Ukraine: Lebanon gets 80% of its wheat from Ukraine, while Egypt gets 80% of its wheat from Ukraine and Russia; Somalia and Benin are 100% dependent on wheat from the two warring countries. Deutsche Welle TV reported that wheat shortages from Ukraine are being felt particularly in East Africa, where prices for bread and sunflower oil have more than doubled since the war began.
The organic growing areas of Ukraine are occupied
Ukraine is one of the world’s leading producers of organic crops. According to the European CommissionIn 2019, the country was the largest exporter of organic products to the European Union and the second largest exporter of organic products worldwide.
In 2020, Ukraine reportedly had 1.1 million acres of organic farmland Bio Info Ukraine. Much of this country, however, is in areas where hostilities or occupations are currently taking place. For example, the Cherson region, Ukraine’s largest organic region, is almost completely occupied by Russian troops, the organization noted.
Exports notwithstanding, humanitarian concerns also revolve around Ukrainian farmers and the country’s ability to feed itself. The Research Institute of Organic Agriculture (fiBL), based in Switzerland, said in mid-April that the institute and its partners – Organics International, Helvetas and IFOAM Organics International – are working to identify stakeholder needs and provide support. “This is important to ensure that people in Ukraine have access to healthy, nutritious food that is grown sustainably and that (organic) farmers do not lose their livelihoods. We are currently working with Ukrainian organic stakeholders and partners to ensure they can continue to grow and supply food and feed – now and in the future.”
Low-income households in the US disproportionately affected
Low-income households around the world, including the United States, have been disproportionately affected by the sharp rise in food prices triggered by two years of economic and supply chain disruptions resulting from the COVID-19 pandemic and exacerbated by the Russia-Ukraine conflict .
According to U.S. Bureau of Labor Statistics consumer price index data released in April, home grocery prices rose 10% last year — the fastest pace since March 1981. Food and energy costs pushed inflation up to 8.5% in March compared to the previous year same month a year ago, marking the highest rate in more than 40 years as consumers continue to feel the pinch of higher prices.
Bank of America analysts predicted on April 21 that the effects of the Russian-Ukrainian conflict are not yet fully felt in grocery stores. “Looking ahead, we believe consumers will continue to feel the pinch of elevated grocery inflation,” the analysts wrote. “Although much attention has been given to the shock of the Russia-Ukraine conflict, we believe it is too early to see the impact on the grocery business… rather, it should lead to sustained price increases later this year.”
Bank of America analysts expect U.S. grocery inflation to hit 9% by the end of 2022, Fortune reported.
Bank of America analysts noted that farmers are also grappling with spikes in input costs, including fertilizers and pesticides, which have risen 50% in the past year alone, according to the US Bureau of Labor Statistics’ producer price indexes. According to the Observatory of Economic Complexity, in 2020 Russia was one of the world’s top exporters of fertilizers, including urea and potash, and fertilizer prices were also fueled by higher costs for natural gas, which is used in the production of nitrogen-based fertilizers.
“There are signs companies are experiencing higher costs,” the Bank of America team wrote. “Margins appear to be increasing at both the wholesale and retail levels, suggesting that companies have regained pricing power and are comfortable letting the consumer pay higher costs instead.”
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