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A global famine is still an avoidable disaster

Inflation, energy prices and freight insurance rates are threatening the food security of vulnerable countries

Global food security is under a lot of stress from a growing population, climate change and various political threats
Global food security is under a lot of stress from a growing population, climate change and various political threats (Photo by Polina Rytova, Unsplash)

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The E.U. and the U.S. accuse Russia of creating a global food crisis with its Ukraine invasion. Yale history professor Timothy Snyder even finds ominous historical parallels between the current goings-on and the famine in Ukraine — and parts of Russia — caused by the Bolshevik collectivization in the early 1930s. “Putin has a hunger plan,” Snyder recently tweeted. 

The invasion has certainly delivered a series of shocks to global commodity markets that have threatened the food security of the most vulnerable countries, especially African ones. These shocks, however, appear to have more to do with energy prices and freight insurance rates than with the disruption of Ukrainian agricultural exports — which Ukraine does its best to maintain despite near-impossible conditions. And if Putin does have a “hunger plan,” he recently shot himself in the foot by lowering Russia’s grain export duties. That move and forecasts of a bumper harvest in a number of countries have been driving wheat prices down; it’s likely that an acute food crisis will be avoided this year and next. To try to shed some light on what’s been going on, I’ll use the example of wheat, probably the world’s most important food crop, of which both Russia and Ukraine are major exporters.

Also Read: United Nations highlights hunger issues in Afghanistan

According to the U.S. Department of Agriculture, Ukraine was responsible for 8.2% of total wheat exports in the June 1, 2020 — May 31, 2021 marketing year and 9.5% of estimated total exports in the 2021-2022 marketing year. The war’s effects have only kicked in in the last two months, with Ukraine’s share of exports shrinking to less than 5% of the total. According to Ukrainian government data, the drop has been much steeper. In June, wheat exports shrank by a factor of five year-on-year. In any case, even with its Black Sea ports blocked or occupied, Ukraine has kept up a considerable export stream. Deputy Infrastructure Minister Mustafa Nayyem recently posted on his Telegram channel that since the war began, physical cargo volumes sent from Ukraine to Romania have increased 460%; agricultural cargoes taken by rail to the Romanian port of Constanta account for the bulk of that increase.

What the world has lost with the drop in Ukrainian exports, it has more or less made up from other sources. Canada, the European Union and, yes, Russia too, have all increased their shares of global wheat exports in the last two months. The U.S.D.A. projects an actual increase in exports this marketing year to 204.6 million metric tons from 203.3 million tons in 2021/2022 and 199.3 million tons the year before. 

Total wheat production is likely to drop somewhat, largely because of extreme temperatures in India. But neither the production projections nor the U.S.D.A. estimates of year-end stocks foretell anything like a global wheat shortage.

This doesn’t mean the poorest consumers in Africa aren’t vulnerable. European wheat is more expensive than at any point since 2011; Russian wheat was last this costly in 2013. Though there is no grain shortage, a jump in fuel costs — caused in part by Vladimir Putin’s military adventure in Ukraine — has driven up prices and imposed a heavy financial burden on importers. Transportation costs have increased — because of the fuel prices for everyone and because of a jump in insurance costs for Russian producers. According to the U.N., between February and May, the cost of shipping dry goods such as grain has rocketed 60%between February and May Costlier shipping and Russian companies’ difficulties in finding insurers and shippers further threaten the global food supply by undercutting fertilizer exports, in which Russia leads the world. The U.S. has even offered to send “comfort letters” to vessel owners leery of handling Russian grain and fertilizer because of the threat of Western sanctions. 

Western politicians who lay the blame at Putin’s door are fundamentally right: A Russian withdrawal from Ukraine would quickly fix the disruption and drive down prices. The ostracism Russia has faced from Western governments and companies is not some kind of a whim — it’s a response to unprovoked aggression against a neighbouring state and a string of what can only be described as war crimes. Putin has shown no qualms about using economic blackmail against countries he considers hostile — witness the reduction of gas supplies to Europe — so there’s every reason to suspect him of using Russia’s leadership in the wheat and fertilizer trade to pressure rival nations and drive a wedge between the West and Middle Eastern and African food importers. There are also lingering doubts about Putin’s rationality. No potential gain from the invasion is worth the cost it’s imposing on Russia and its people.

And yet, in a flashback to his erstwhile economic craftiness, Putin appears to be trying to balance his desire to hurt the West against collateral damage to large groups of Russians. While about 460,000 people work for the national gas producer, Gazprom, and they won’t suffer much from the gas export cut-offs, Russia, according to official statistics, has about 10 times as many farmers who would be hit hard by the inability to export their produce.

Also Read: Cyclone Tauktae and how citizens fight hunger

Besides, Russia’s status as the world’s biggest wheat exporter is hard-won. It’s a point of pride oft-mentioned in Putin’s speeches because Russia gained it during his tenure. The Soviet Union had been a major grain importer, and it took decades to turn around the situation. By all appearances, Putin wants Russian wheat exports to continue unabated: As of this month, the Russian government has lowered export duties on grain and other agricultural products, making them payable in rubles rather than U.S.U.S. dollars. The measure is making it possible for Russian suppliers to lower prices so that the country doesn’t lose global market share because of the war-related risks of dealing with it — including the risk of buying stolen Ukrainian grain. 

Global wheat prices are already down considerably from the dizzy heights they reached earlier this year. The September wheat futures contract is down 35% from its May peak. Seasonal factors and rosy harvest projections are responsible for much of the decline, but the Russian move also has been priced in. The market may well balance at levels that will prevent a full-blown food crisis and a famine in the most vulnerable nations.

Global food security is under a lot of stress from a growing population, climate change and various political threats, as my Bloomberg View colleague David Fickling recently pointed out. Food should be a clear exception from all kinds of economic wars. While it’s pointless, at least for now, to negotiate with Putin on ending the invasion — he shows zero willingness to compromise on that front — his administration hasn’t quite shed the remnants of economic rationality, and it still makes sense to negotiate improved conditions for Russian grain and fertilizer exports in exchange for Ukraine’s unhindered access to the global commodity market. Any energy embargoes, too, should be considered through the lens of their potential effect on the world’s food supply. It’s painful to many that allowing Russia’s export trade to continue as before funds Putin’s war effort and multiplies human suffering. But cutting Russia out of the food supply equation is hardly realistic. 

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