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First, We Steal the Grain

The Signal
War Pricing
How bad is the global food crisis? Laura Wellesley on how the conflict in Ukraine is threatening tens of millions in developing countries with shortages and starvation.
Patrick Hendry
Patrick Hendry
Russia is pilfering Ukraine’s grain exports to sell for its own profit,” U.S. Secretary of State Antony Blinken said in early June. Beyond stealing grain, Moscow’s armed forces have cut off nearly all Ukrainian food exports by blockading Kyiv’s Black Sea ports, while the fighting has damaged much of Ukraine’s most fertile farmland. Before the war, both Russia and Ukraine were major global food exporters; the two countries together grew about a third of the world’s wheat supply. But as the war disrupted Ukrainian food shipments, the global prices of many basic foods started to rise sharply. High prices and shortages have since put tens of millions of people worldwide in danger of starvation, while millions more have fallen into poverty because they can’t afford to buy food staples. And the outlook is bleak: After Russia cut off Ukraine’s food exports, other key suppliers, such as India, have banned the export of wheat. How dire could this get?
Laura Wellesley is a senior research fellow in the Environment and Society Program at the London-based policy institute Chatham House, where she works on food trade, food security, and climate change. According to Wellesley, the global food crisis is only going to get worse in the short term. Ukraine’s wheat harvest is likely to fall well short of its usual volume this summer, and the country might not be able to export the harvest at all—or even find places to store it, because most silos in Ukraine are still filled with the previous harvest. And the food crisis could lead to more geopolitical unrest and conflict. Worse, Wellesley says, the emergency is likely to persist for years to come, on account of the harm done to Ukraine’s farmers. Even before the war, she says, food prices were climbing because of record droughts, climate change, and supply disruptions caused by the Covid pandemic. Ultimately, as Wellesley sees it, the food disaster isn’t a coincidental outcome of the war; it’s an intended outcome of Russian President Vladimir Putin’s strategy of using Russia’s and Ukraine’s critical food exports as weapons.
Michael Bluhm: What effects are these price spikes and shortages having?
Laura Wellesley: The short answer is that this is all very bad. We were already looking at a situation that was severe and likely to get significantly worse without a range of interventions. The global food-price index from the UN Food and Agriculture Organization [FAO] reached the highest level on record following Russia’s invasion of Ukraine.
We know from experience that huge price spikes can lead to severe, wide-ranging consequences. In 2010 and 2011, the spike in wheat and bread prices in North Africa was one of the contributing factors to the Arab Spring—and that price spike wasn’t as severe as this one is now.
It’s important to bear in mind that the interruption of supply here is going to be long-lasting. Ukraine and Russia were one of the globe’s vital agricultural regions, responsible for a significant share of global exports of wheat, sunflower seeds, and maize. Ukraine’s role as a supplier has been undermined for the long term. Even after the war is over, it’ll take a long time for the country to recover and regain its position as a global supplier.
For Russia, Putin’s actions are likely to cause long-term fractures in the international community and geopolitical relations—which means sanctions are likely to stay in place for a long time. Russia is a major supplier of fertilizer, particularly to Europe, so the upward pressure on fertilizer prices is likely to hold.
What this means is the upward pressures on food prices are unlikely to ease meaningfully anytime soon—though they have come down somewhat from the initial, record spike.
Bluhm: You’ve written that Putin strategically targeted Ukraine’s port cities, not only to weaken Ukraine but also to improve his negotiating position with Western powers—as though he were holding Ukraine’s food exports hostage as an economic bargaining chip. One striking feature of this war is the prominence of economic tactics, whether the brinksmanship over Russian energy supplies or the unprecedented sanctions imposed by Western countries against Russia, its banks, and its oligarchs. How do you see Putin’s strategy for Ukrainian food production?
Wellesley: I don’t imagine that I can impose any kind of logic on the actions Putin has taken. But what’s clear is the importance of Ukraine’s supply to global markets—and, in particular, the importance of Ukrainian ports in the Black Sea region, which Russia has targeted strategically.
When Russia seized Crimea from Ukraine eight years ago, Moscow took control of the Kerch Strait, which links the Sea of Azov, east of the Black Sea, to the Black Sea itself. In doing so, Russia took away significant export capacity from Ukraine. It also took Sebastopol, an important port on the Crimean Peninsula.
In the current conflict, Russia is taking key ports like Mariupol and Berdlansk. It’s blockaded Odessa and the ports around it. I don’t think there’s any coincidence in Russia having targeted major port cities. And in response to calls to open those ports for grain exports, Russia has said, We will do that once certain sanctions against us are lifted. This amounts to a clear use of those export hubs and flows for leverage.
There are also reports that Russia has been exporting grain from Ukrainian ports, and we assume that Russia has taken that grain from Ukrainian silos. It looks to some as though Russia is using its capture of important port cities—and the silos within those cities—to profit from the export of Ukrainian grain while blockading Ukraine’s own export of grain.
The UN has been very clear that the effects of holding up exports of grain from Ukraine will be very significant for global food security. Ukraine and Russia are important suppliers to some of the most food-insecure countries in the world—meaning, countries that lack consistent access to sufficient food for their people. Russia is still exporting its grain, and buyers in North Africa in the Middle East are still importing it. But the loss of Ukraine’s exports in the coming months will be felt very heavily by food-insecure countries.
Adding all those pieces together, it’s beyond doubt that Putin is using the threat of a massive shortfall in global wheat, sunflower, and maize exports from Ukraine as a weapon in this war. He’s putting pressure on the international community to bend to his will, using the threat of—in the words of the UN—a looming famine of historic proportions.
Flash Dantz
Flash Dantz
More from Laura Wellesley at The Signal:
Ukraine’s silos are full of last year’s harvest, so whatever’s yielded this season will have very few places to go. The EU has been enabling, as far as it can, the export of grain over land and via the Danube River. But the volume of exports on those routes will be very small. There simply isn’t the infrastructure, capacity, or systems in place to get grain out of Ukraine over land rather than through ports. The FAO expects that up to 30 percent of the usual harvest will either have gone unplanted or won’t be reaped this year—and I think that’s a very conservative estimate. It will be an unusually small harvest, but we’re still likely to see a storage-capacity shortfall of 20 million tons or more. And then the question is, what happens to that grain? Does it rot in the fields? Is there sufficient temporary storage to hold things over until silos with last year’s harvest are emptied?”
There are lots of unknowns about how high food prices will play out in the longer term. There’s a question about what economists call demand switching: Will high wheat prices cause demand to switch to maize or rice? Those kinds of things are difficult to predict and will have an impact on how high food prices play out at the household level. Different governments are responding in different ways. Some are intensifying efforts to boost domestic production—for example, by introducing new measures to support domestic producers—and moving toward self-sufficiency. Others are trying to diversify their import sources to increase the security of their supply, hedging their bets against disruptive risks and volatile food prices.”
We’re dependent on a very small number of crops for the majority of the global food supply—and we’re heavily dependent on a very small number of key agricultural regions. There’s very limited redundancy in the system. Global stocks are very low. Governments are reticent to build up strategic reserves—because they’re very expensive, and because governments see just-in-time international supply chains working the majority of the time. There’s very little flexibility, so we don’t tend to have many options for switching to different modes of transport when, for instance, ports and railways are disrupted. There’s very little diversity because of that concentration of supply. It’s often not easy to switch between suppliers or commodities. We have a system that’s very exposed to disruption—and that creates rapid ripple effects when one part of it goes wrong.”
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