10 May 2022 4 min read

War and the risk to global food security

By Alexander Burr

Policymakers must seize the opportunity to strengthen the food system, not retreat into protectionist measures.

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Although the Russian-Ukraine war is geographically limited, its impact is not. It has global, long-term implications for our economies and lives. It has highlighted the systemic risks and vulnerabilities of our interconnected, globalised world.

As policymakers implement reactionary measures to the war, they may be taking decisions that change the direction of our system, specifically becoming less globalised. I'm certainly not advocating for protectionist measures – far from it. However, we could note that the indirect impact may in some way help accelerate progress on the long-term, market-wide sustainability challenges. Let’s take energy security policy as an example. If policymakers choose wisely, it could be the impetus to accelerate the transition to net zero through greater investment in renewables and energy efficiency.

Another systemic risk that has been highlighted by the war is food security. It’s a fundamental requirement for stability and growth across our economies. It has the potential to cause significant instability if price and supply is affected, and was arguably one of the factors that sparked the Arab Spring[1]. Policymakers need to use this moment to build a more robust, resilient and stable global food system.

How the war is affecting the food system

Ukraine is the breadbasket of Europe. Expectations for 2021/2022 had been that Ukraine would account for 12% of wheat and 18% of maize traded globally. Adding Russia’s exports, we’re talking a collective contribution of 30% of global supplies of wheat and 20% of maize. Combined, the two countries also account for roughly three-quarters of sunflower oil and a third of barley supplies globally. Russia is also a significant supplier of fertiliser to the world[2]. The Black Sea region is integral to the supply and stability of the globalised food system.

The war has caused significant disruption, resulting in spikes in commodity prices. Military action has destroyed, or is continuing to disrupt, key infrastructure e.g. ports, railways, roads, storage; Western economic sanctions and Russian export policy restrictions have limited supply; transportation has been hit by increased insurance premiums; and crops have either not been planted or not been harvested. In March, the FAO Food Price Index (a measure of monthly change in international prices of a basket of food commodities) rose 12.6% from February, and the FAO Cereal Price Index was up 24.9% from February; both the greatest increase since 1990[3].

These price rises have exacerbated an already difficult post-pandemic environment, where demand for food, energy and fertiliser was already outstripping supply. David Beasley, executive director of the UN World Food Programme (WFP), descried the war as, “a catastrophe on top of a catastrophe” with an impact “beyond anything we’ve seen since World War II”[4].

What does this mean in practice?

The WFP estimates that we’re looking at adding 47 million people (on top of an existing 276 million) to the number that will become acutely food insecure in 2022[5]. The greatest impact will be in low-income and increasingly debt-distressed countries, and net food-importing countries such as Egypt and Lebanon (importing 85% and 81% of grain from Russia and Ukraine in 2020-2021, respectively).

In the UK, the cost of food rose 5.9% in March 2022[6]. This is the highest rise since September 2011[7] (which was a result of the heatwave affecting agricultural production in Ukraine and western Russia). This has potential to worsen an already bleak situation in the UK: 10% of households already experienced food insecurity between August 2021 and January 2022, according to The Food Foundation[8].

What can policymakers do?

Unfortunately, some policymakers are taking a short-term, protectionist approach. The world’s largest exporter of palm oil, Indonesia, has recently imposed a blanket ban on exports in an attempt to reduce the impact of rising food prices. Argentina is blocking exports of soybean meal and oil; Egypt is banning exports of flour, lentils and wheat; and Morocco reducing its tomato exports to Europe[9]. Moldova, Hungary and Serbia have restricted sales of some grain exports. Russia has also said it will restrict supply of fertilisers to ‘friendly nations’. Such restrictive policy decisions are the entirely wrong strategy, making it harder to achieve stability and exacerbating global food insecurity.

Thankfully, some policymakers are pushing back. In March, agricultural ministers of the G7 called on “all countries to keep their food and agricultural markets open and to guard against any unjustified restrictive measures on their export”[10].

Policymakers across the world need to strengthen the food system. It’s a challenging task, but key features could include measures to:

  1. Diversify the supply chain
  2. Increase local, diverse production
  3. Transition away from use of increasingly expensive and unsustainable fertilisers and pesticides through organic production methods
  4. Provide incentives for greater productivity

The international community must also work together multilaterally to minimise the impact of supply-chain disruptions, strengthening the system in a way that is transparent, predictable and rules based.  

Sources

[1] https://www.theguardian.com/lifeandstyle/2011/jul/17/bread-food-arab-spring (accessed 5/5/22).

[2] https://www.reuters.com/business/sanctions-bite-russia-fertilizer-shortage-imperils-world-food-supply-2022-03-23/ (accessed 5 May 2022).

[3] https://www.fao.org/worldfoodsituation/foodpricesindex/en/ (accessed 27 April 2022).

[4] https://www.huffpost.com/entry/ukraine-war-food-insecurity_n_6243ef55e4b0e44de9bad640 (accessed 27 April 2020).

[5] https://reliefweb.int/sites/reliefweb.int/files/resources/WFP-0000138155.pdf (accessed 27 April  2022).

[6] https://www.ons.gov.uk/economy/inflationandpriceindices/datasets/consumerpriceinflation (accessed 27 April 2022).

[7] https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/march2022 (accessed 27 April 2022).

[8] https://foodfoundation.org.uk/initiatives/food-insecurity-tracking (accessed 27 April 2022).

[9] https://www.bloombergquint.com/onweb/food-security-panics-governments-as-ukraine-war-blocks-supplies (accessed27 April 2022). Please note that this link may not be accessible in some regions.

[10] https://www.bmel.de/SharedDocs/Downloads/EN/_International-Affairs/g7-extraordinary-meeting-statement.pdf?__blob=publicationFile&v=6 (accessed 27 April 2022).

 

Alexander Burr

ESG Policy Lead

Alexander joined in 2019 and leads LGIM’s ESG policy engagement across markets. Prior to this, he helped establish an impact fund that uses blended finance to invest in emerging markets. Before that, Alexander negotiated blended finance investments at the European Bank for Reconstruction and Development (EBRD) to support sustainable economic growth across Eastern Europe, Central Asia, and North Africa. He has held roles advising governments on alternative finance and established a nuclear safeguards organisation. Alexander holds a BSc in Politics and International Relations from the University of Southampton, and further education at LSE, ICSA, CISL, and Birkbeck.

Alexander Burr