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We've reached peak global food inflation, says IFPRI expert
Global food prices have been going through the roof over the past few months — but there's some good news on the horizon.
Weather permitting, the prices of key commodities like wheat are now almost back to their levels before Russia invaded Ukraine, David Laborde, a senior fellow at the International Food Policy Research Institute, said during a livestream discussion on the global food crisis hosted by GZERO Media in partnership with the Bill & Melinda Gates Foundation.
"Overall, I think really we have reached in global markets already the peak in terms of prices," he added.
At the country level, we can still expect a few more months of rising prices because there's always a lag between global markets and our local grocery store. The other problem is high energy prices, which drive up transportation costs, but unless there's a climate shock in a big producer Laborde believes "we have seen the worst of it."
If we don't act fast to help smallholder farmers, developing world might soon run low on food
Ertharin Cousin, former head of the UN's World Food Programme, doesn't like when people talk about the handoff between humanitarian response and development response.
Why? Because that imperils those caught in between the two, such as smallholder farmers who barely survived the pandemic and are now struggling with the global food price crisis, she explained in a livestream discussion, "Hunger Pains: The growing global food crisis," presented by GZERO Media in partnership with the Bill and Melinda Gates Foundation.
Cousin says we must meet what she refers to as the "midterm" challenges so months from now we don't transition from "a food affordability crisis to a food availability crisis."
That's no exaggeration, she adds, because 80% of the food consumed in the developing world is affected by what smallholder farmers are going through today.
An ear of wheat in a field near the village of Hrebeni in the Kyiv region
Will Putin eat the world’s bread?
The global food industry has gone bonkers. Since Russia invaded Ukraine last month, global wheat prices have gone through the roof, and sunflower oil is becoming a rare delicacy.
The looming global food crisis has been years in the making. Extreme weather events linked to climate change and pandemic-induced supply chain issues had already caused shortages and sent prices surging. The war in Ukraine has made a bad situation much worse. But how bad might things get, and who holds all the cards?
A war between two agricultural giants. The war in Ukraine is making key food staples around the world more scarce and pricier. Together, Ukraine and Russia account for more than 30% of global wheat exports, most of which have been cut off from the global market. Paying Russia for agriculture exports has become nearly impossible because of sanctions. Ukraine has banned the export of food staples, including wheat, to ensure it has enough to feed people during the war. This is worrying for the dozens of low- and middle-income countries that depend on Russia and Ukraine for one-third or more of their wheat supply.
What’s more, the lingering war, now entering its second month, means that farms may miss out on key planting and harvesting seasons this summer, sending supply chains into a further tizzy.
How bad might things get? Even in wealthy countries, things aren’t looking good. Since Russia invaded Ukraine, many European consumers — already freaked out by pandemic-induced economic uncertainty — have resorted to food hoarding. German grocers, for instance, have been forced to ration sales of cooking oil because of panic-buying. And in the UK, where the war is aggravating pandemic-related inflation, grocery prices have risen at their fastest pace since 2013.
Moreover, there are growing fears that Vladimir Putin could weaponize food exports to inflict harm on the West. Moscow has already blocked ships carrying goods from leaving the Black Sea and has vowed to retaliate for crippling economic sanctions. Indeed, capturing the Ukrainian port city of Odesa, a critical commercial point for the former Soviet Union, would allow Russia to control cargo shipments of food in the region.
If Putin plays hardball, food will get even more expensive in many parts of the world, particularly in poorer countries. This is already coming to a head in cash-strapped Lebanon, which is plagued by political and economic crises and is now facing even more severe food shortages.
Many governments are in a bind as the only thing they can do to remedy the problem is enforce price-fixing and subsidies. But these measures might hurt them in the long run, says Peter Ceretti, a senior analyst at Eurasia Group. "For governments, particularly those with limited resources, subsidies also become a growing drag on public coffers," he says, adding that "the political consequences of cutting them back if the state can no longer afford them at some point could be very serious."
Egypt, the world’s largest importer of wheat — 80% of which comes from Ukraine and Russia — this week fixed the price of unsubsidized bread to stave off a social and economic crisis. Meanwhile, countries such as Hungary and Serbia have banned grain exports.
This dynamic could lead to major political and social upheaval around the world. In import-reliant Egypt, President Abdel Fatah Al-Sisi knows that popular anger over wheat prices in his country — where about two-thirds of the population eat subsidized bread — could spill over into a mass uprising. A drought-induced food crisis in 2007-2008 led to riots in dozens of countries. In 2008, Egypt’s former authoritarian leader Hosni Mubarak ordered the army and police to bake bread to try and lower the temperature.
Who holds the cards? Russia, of course, and the West, which is trying to boost production to offset losses from Ukraine and Russia. But the real powerbroker could be China, which hoards half the world’s grain. Some analysts warn that China could use its grain stocks to try and win bellies and minds across Africa, Latin America, and the Middle East.
“The concern is that China will use its grain stores as a diplomatic tool. In an environment of global scarcity, they could use their supply to curry favor selectively," says Eurasia Group Vice Chairman Gerald Butts. "It may not go where it’s needed most, but where it will deliver the best diplomatic return for China.”
The United Nations, for its part, has warned of a “hurricane of hunger,” saying that as the war lingers, things are bound to get much worse.
- Biden wants Putin out - GZERO Media ›
- Russia-Ukraine war: How we got here - GZERO Media ›
- War in Ukraine: cascading impacts on global food supply - GZERO Media ›
- Russia's war in Ukraine is starving the world - GZERO Media ›
- Russia plays hardball with blockage of Ukraine grain exports - GZERO Media ›
- Russia weaponizing blockage of Ukraine grain exports - GZERO Media ›
- Russia's weapon: blocking Ukraine grain exports - GZERO Media ›
- What's causing the growing global food crisis? Live townhall today at 2 pm ET - GZERO Media ›
- What's causing the global food crisis? Live townhall today at 2 pm ET - GZERO Media ›
- Podcast: The Ukraine war is crippling the world's food supply, says food security expert Ertharin Cousin - GZERO Media ›
Indian farmers harvest wheat crop in Rajasthan.
Hard Numbers: Indian wheat, Czech worker shortage, Pyongyang airport missile launch, TSA no-mask fines
10 million: India plans to export 10 million metric tons of wheat this year to make up for the shortfall caused by the war between top producers Russia and Ukraine. Wheat prices have hit record highs in recent days amid wider fears of a looming global food price crisis.
2.2: The Czech Republic now has the lowest unemployment rate in the EU, at 2.2%. While that’s normally a good thing, the Czech economy is actually struggling to fill many jobs — in part due to a pandemic-fueled worker shortage.
12.4: Since North Korea doesn’t get a lot of international flights these days, Kim Jong Un has turned Pyongyang’s airport into a makeshift missile launch site. A rocket fired from there on Wednesday blew up after traveling 12.4 miles in less than a minute, reportedly shedding debris over the capital.
644,000: That’s the total amount of fines in dollars issued by the TSA to Americans who violated the federal mask mandate in US airports. Despite many states having recently lifted mask mandates for indoor activities, the TSA wants to keep it in place for US airports until at least April 18.A view shows cars and a building of a hospital destroyed by a Russian air strike in Mariupol, Ukraine.
What We're Watching: Ukrainian city under siege, Ripple Effects, Afghan railway
Zelensky calls hospital strike in Mariupol an ‘atrocity’
Children and mothers fall victim. On Wednesday, Russian bombs and missiles ravaged the strategic Black Sea port city of Mariupol in southeastern Ukraine, just 35 miles from the Russian border. In one of the war’s most gruesome moments thus far, a children’s hospital and birthing center were badly damaged by munitions, reportedly killing two adults and one child and injuring several others. A Ukrainian official said the attack occurred during an agreed-upon ceasefire with Russia. The town’s administrative center was also badly damaged. If the city falls, Russia would have all but established a “land bridge” to Crimea.
Russia uses conscripts. The Russian Ministry of Defense’s own media outlet admitted Tuesday that a small number of Russian conscripts (those drafted against their will into the army) had been sent into Ukraine, something that President Putin has repeatedly denied. It’s a further sign that Putin’s initial plan — for a swift takeover with professional soldiers — has failed. This could be politically dangerous for the Russian leader: conscripts going to Ukraine and possibly coming home in body bags is something that may have a more immediate impact on Russian public and elite opinion than any Western sanction or corporate departure from Russia.
US aid for Ukraine, but no jets. The US Congress agreed to earmark $13.6 billion in humanitarian and military aid for Ukraine as part of a broader budget bill. In haggling over the $1.5 trillion omnibus spending legislation, Democrats agreed to strike $15.6 billion in additional COVID relief funds. It remains to be seen whether Democrats will pay a price for prioritizing Ukraine over pandemic stimulus. Meanwhile, the Pentagon confirmed that it was formally rejecting Poland’s proposal to send Mig-29s to NATO for a handoff to Ukraine. Washington continues to have zero appetite for even the appearance of a direct clash between NATO and Russian planes.
Who owns Chelsea? The British government on Thursday included billionaire and Chelsea FC owner Roman Abramovich in its latest wave of sanctions against Russian oligarchs with assets in the UK and ties to the Kremlin. Perhaps fearing he'd be next on the list, the billionaire had already decided to sell his soccer club, current UEFA Champions League champion. Now the sale is on hold — although the UK has said a special license will enable the club to continue operating. Interestingly, Abramovich brokered the initial peace talks between Russia and Ukraine in February, but he and six other oligarchs, including Igor Sechin (CEO of energy giant Rosneft), are now sanctioned.
The Ripple Effect
Putin’s war has brought immense suffering to Ukraine, led to near-complete isolation of Russia from the West, and created a refugee crisis of historic proportions. But it’s also sending economic shockwaves around the world in ways that could profoundly affect everyday life. In the Middle East and North Africa, soaring prices for wheat and fertilizer (Russia and Ukraine are top producers of both) threaten a food crisis that could leave millions starving. Fears of an interruption in sunflower oil exports from Ukraine and Russia, meanwhile, have caused major economies like India to switch to palm oil. This, in turn, has driven up prices, forcing Southeast Asian producers like Indonesia to impose export bans. Meanwhile, Central Asian economies that depend on remittances from Russia are reeling as the Russian economy nosedives. Worldwide, higher energy prices are slamming economies already struggling with pandemic-related inflation. The ripple effects are far-reaching, and we are only just beginning to see them. What aspects of the crisis are echoing where you live?
Iran, Afghanistan discuss massive rail project
Tehran is talking to the Taliban about resuming a massive rail project connecting five Central Asian countries, which the Iranians hope will boost trade and travel while limiting transit costs. The Khaf-Herat link, halted when the Taliban seized control of Afghanistan last year, is part of the $2 billion Five Nations Railway Corridor that will link China, Kyrgyzstan, Tajikistan, Afghanistan, and Iran. While Iran has not yet officially recognized the Taliban as the Afghan government, it remains Afghanistan’s No. 1 trade partner and its key oil supplier. The project is a big deal. If completed, the railway would connect China to Turkey and Europe along the ancient Silk Road. For another, Afghanistan would surely benefit from modern infrastructure to trade its mineral wealth.
The Graphic Truth: Cereal killer — wheat prices amid Ukraine crisis
Russia's full-scale invasion of Ukraine will ripple throughout the global economy in many ways, but one immediate concern is that it could send food prices soaring in some parts of the world. That's because Russia is the world's largest wheat exporter, and the two warring countries together account for more than a quarter of global exports. Here's a look at how wheat prices rose as the crisis escalated, along with a snapshot of the countries most vulnerable to price hikes or supply disruptions.
- Russia plays hardball with blockage of Ukraine grain exports - GZERO Media ›
- Russia weaponizing blockage of Ukraine grain exports - GZERO Media ›
- Russia's weapon: blocking Ukraine grain exports - GZERO Media ›
- Podcast: The Ukraine war is crippling the world's food supply, says food security expert Ertharin Cousin - GZERO Media ›