- GS-2: International Relations
- GS-3: Economy & its challenges
Russia-Ukraine conflict can spark a global food crisis
Context: The food economy remains at the heart of geopolitical conflict sparked by Russia’s invasion of Ukraine.
Importance of Russia and Ukraine in global food economy
- Russia (18%) and Ukraine’s (8%) contribute about a quarter of the global wheat exports.
- Russia and Ukraine are important players in corn production and had a 14 per cent share of global maize exports in 2020.
- Also, these two countries lead in sunflower oil production and have a 40 per cent share in exports, with Russia accounting for 18 per cent of global sunflower oil exports.
How will the global food economy be impacted by the Ukraine crisis?
- Rise in global commodity prices: Disruption in production and international trade in commodity and agricultural products caused by war leads to increase in prices. The spikes in the international prices of maize (21 per cent), wheat (35 per cent), soybeans (20 per cent), and sunflower oil (11 per cent) have been reported.
- Food Security: Food security has six dimensions: availability, access, utilisation, stability, agency, and sustainability, which are expected to be affected by this crisis.
- For ex: It has already raised concerns over food security Africa. In 2020, African countries imported $4 billion worth agriculture produce from Russia ($2.9 billion worth from Ukraine). 90% of Russian imports consisted of wheat and 6% sunflower oil (Ukraine imports consisted of 48% of Wheat, 31% maize and rest as Sunflower oil)
- Food Inflation: The crisis would spur food inflation which might further constrain government’s capabilities to take measures (reducing interest rate) to revive economy in the aftermath of COVID-19 induced slowdown.
- Other factor can worsen the situation: Poor harvest due to dry spells in South America and Indonesia and rising demand for wheat and oilseeds in China and India can worsen the situation.
- Opportunity for other countries: Wheat exporting countries such as Canada, Australia, and the US are likely to benefit from any potential near-term surge in cereals demand.
- Also, oilseeds growing countries such as China, EU nations, Canada, and India can step into a market dominated so far by Russia and Ukraine.
- Increase in Fertilizer price: Armed conflict can have a ripple effect on rising oil and fertiliser prices, affecting farmers in developing and least-developed countries and straining government finances.
- Grain bank and edible oil supply could help meet the starvation of the impoverished in the near term.
- Agencies such as State Trading corporations, Food Corporation of India, and multinational oilseeds trading firms can help tide over the crisis by updating their food supply chain and public distribution system to make it resilient and efficient.
- Also, export promotion of fortified foods can help the poor of those nations which are severely impacted by the crisis (ex: African countries)
Connecting the dots: