UN warns: major impact of Ukraine crisis will be global hunger

One of the major consequences of the Ukrainian crisis will be a global food crisis that will affect hundreds of millions of people around the world, UN Secretary General Antonio Guterres said


According to international experts, the threat of famine is now the greatest since the Second World War, because the customary system of food supply is breaking down right before our eyes. And this could have catastrophic consequences for many regions of the planet – even if they are not directly involved in the conflict.

“The war in Ukraine is already disrupting supply chains and causing fuel, food and transport prices to skyrocket. We must do everything we can to prevent a hurricane of famine and a collapse of the global food system”, –  UN Secretary-General Antonio Gutteres told us. He made no secret that the situation was becoming increasingly dramatic.

The rise in the price of staple foods marked two years ago, in 2020, against the backdrop of the coronavirus pandemic. However, the outbreak of hostilities in Ukraine immediately led to an explosion in food prices. As early as the first week of March the price of wheat rose by 40% and reached a fifteen-year high, exceeding USD 375 per ton. And then the price of grain rose by another 8%.

“Russia and Ukraine are major wheat producers, accounting for about 30% of world exports, so this is one of the areas where the direct economic impact is felt,” commented German Deutsche Bank analysts, who believe that wheat prices will rise with every week of war. And it is almost impossible to prevent the rise in prices – because it is caused by a whole set of economic and politico-military factors.

Exports of grain from Ukraine have been blocked because it was traditionally sold to the world market through the Black Sea and Azov Sea harbours, and now this “window to Europe” is closed. Economic ties with Belarus have been recklessly severed by cutting off railroad connections, and it has not been possible to establish full-fledged supplies of Ukrainian grain through Europe. Because tough protectionist barriers and bureaucratic hurdles of the European Union prevented it. So it proved to be unprofitable and problematic to sell wheat this way, even with the unprecedented rise in world prices.

Exported wheat is mostly stored in warehouses and Ukrainian agribusiness cannot yet find stable channels for its export. According to experts, it is unrealistic under wartime conditions, as the long-established logistic schemes have collapsed. At the same time, agro-firms are in no hurry to supply the domestic market, explaining this by the fact that many bakeries have stopped their work or significantly reduced its scope. Despite the fact that bread shortages are now felt in most regions of Ukraine.

In turn, the Russian authorities have imposed restrictions on the export of agricultural products in order to ensure food security and avoid a rise in the price of bakery products. To this end, strategic grain stocks are being created, and many agricultural producers are themselves curtailing foreign economic contacts with European countries because of the threat of blocked accounts that threaten Russian companies in the light of extensive Western sanctions.

All this has led to a real fever in the global production market. Traders are buying up wheat in Kazakhstan, but these volumes cannot cover the deficit created by the grain supply restrictions from Russia and Ukraine. Not to mention the fact that Kazakh authorities have also started to regulate food sales in order to avoid another spiral of food price increases, which potentially threatens this country with new social upheavals, similar to the events of January.

The situation is even more dramatic on the sunflower oil market, because Ukraine has traditionally been the world’s main producer of this product. Its prices are rising as well and corn, soybeans and rapeseed become more expensive as well. Russia could replace Ukraine as a supplier of sunflower oil. However it is unlikely to happen in light of the aforementioned measures taken today by the Russian government to ensure strategic food security.

But worst of all, the food crisis is now in its infancy. The disruption of the sowing campaign in Ukraine, which most world experts are predicting today, will immediately lead to a new round of global food prices. This could happen as early as May and will be followed in autumn by a third wave of price increases for grains, sunflower and maize. Because then it will become clear that the world markets will not be able to rely on supply from Ukrainian producers.

Ukrainian agrarians have no money for the sowing campaign and the Government does not grant them any real assistance. The Cabinet of Ministers has announced a program of soft loans for agricultural companies with a turnover of up to 20 million Euros, secured by the property they own and their grains. However, analysts of the All-Ukrainian Agrarian Rada point out that banks will not lend to enterprises in the war zone, which is constantly expanding to the south-east of the country, where almost one hundred per cent of the Ukrainian sunflower, corn and over half of Ukrainian wheat is grown. And that basically nullifies the effect of government support.

Finally, agricultural producers do not have enough fertilizers and fuel, without which they also cannot make the sowing campaign. The deficit of diesel fuel in the Ukrainian agrarian sector is from 200 to 250 thousand tons, and the seasonal needs for the field work is over 300 thousand tons. And agrarian companies often cannot receive fuel and lubricants which have already been paid for, because they are hurriedly redirected to the army’s needs.

As a result, agricultural companies cannot get fuel, even if they still have the money to do so. According to experts, this means that Ukraine will be able to carry out no more than 40-50% of the planned sowing campaign. Everyone understands that if they fail to do so they will cause a famine in the country. The neighbouring countries are limiting food exports in anticipation of an impending hurricane that UN Secretary General Gutteres has now warned about. Humanitarian aid will not help to feed everyone in need and buying food will be unaffordable for the war-torn nation given the scale of speculative food price rises.

“Total poverty and scarcity await the world. Money will play less and less of a mediating role in the exchange of goods for goods, or goods for services, or services for services. Markets will be localised and closed to outsiders at the state level, which in turn will create a grey and black market between states, bypassing laws and prohibitions. With prices rising in favour of smugglers and speculators. Their pockets will be full.

Moldova, Hungary and Bulgaria are closing or suspending agricultural exports. From the word “at all”. There will be no sowing season in Ukraine. Mines, bombs, rockets will be sown. But all this abomination will not germinate with wheat. Will Biden’s legs be brought to our aid? I doubt it,” writes the Ukrainian blogger Valery Pesetskiy.

These doubts are fully justified. Most Ukrainians, however, have not yet realized the scale of the disaster that is looming ahead.

Aleksandr Sokurenko, Ukraina.ru