The armed conflict between Russia and Ukraine sharply accelerates the rise of agricultural commodity prices that was going on for some time already. Generally, from the start of the Covid pandemic, logistic costs were rising, but now there are direct threats to the world market availability of such crucial products as wheat and other grains, sunflower oil and fertiliser in the agrifood domain. For all of these Ukraine and Russia are major providers whose exports might be strongly reduced.
Taken together, Russia and Ukraine contribute to around 29% of global wheat export and 76% of global sunflower oil export. They also account for one third of global barley export and 17% of global corn export. Moreover Russia, one of the world’s biggest fertiliser exporters, has banned the export of ammonium nitrate from an earlier date than this conflict started. Consequently, the urea cash price for instance has increased around 90% in the US Midwest. As the biggest buyers of Russian fertilisers, Brazilian crop producers are also suffering. Moreover, this is a world-wide issue. For instance, French growers are demanding from the French government to be compensated for the higher fertilizer costs.
Next to limiting exports from Russia and Ukraine, the general logistic problems are aggravated by the threat the conflict poses to ports and shipping lines in the Black Sea. Especially countries in the Middle East, North Africa as well as Turkey that rely on imports from the Black Sea region are facing vital challenges from an uncertain food supply and extremely high food prices.
Not only food prices go up – energy prices rise even faster. Apart from the general economic disruption caused by these price hikes, agricultural production is hit specifically because of the high energy demand of the production of nitrogen fertilizers. This will further exacerbate the price development of agricultural commodities.
Global free trade as a foundational geopolitical concept was already under pressure for some time. The US-China trade war since 2018, the apparent ease of a local epidemic turning into a pandemic, the disruption of logistic chains by lock downs and closings of production facilities, were all factors that caused worries over the future viability of the free global trade model. With the present consequences of the Russia-Ukraine war no country or region can afford to ignore such worries and still feel comfortable with continued dependence on an open world market that should offer uninterrupted flows of products and stable low prices. The world has reached a tipping point. Instead of one open world we now have to deal with a world divided in competing, conflicting blocks, in which each block had better to be self-sufficient, especially for food as the most vital condition for their survival.
In our work food security requirements play a central role. We developed diagnostic instruments to position a country or region on a scale ranging from completely import-dependent to completely self-sufficient (and even exporting substantial surpluses). We have matching tailor-made solutions ready for improving food security to surpass a critical threshold for survival in ‘worst case’ situations, whether these be caused by extreme – and worsening – climate conditions, simple lack of space, high demographic pressure, general economic under-development, or geo-political tensions. And we have equally tailor-made solutions for surplus-countries to improve their efficiency in filling the gaps that less favoured countries are facing.
In doing so we join our academically founded visions and concepts and our life-long experience in the field (see our team) with the operational expertise of a wide range of state-of-the-art technology providers. We can conceive of the visions, draw up the necessary plans and action programs, and make these really work by integrating our technology providers. Together with them, develop the curricula needed to train the skilled workforce necessary to operate, maintain and innovate the resulting agroparks and metropolitan food clusters.
For more information, please see our website: www.wmfc.nl and contact us!
References:
[1] Gro Intelligence (2022), Impact of the Russia/Ukraine Conflict on Global Agriculture by the Numbers
[2] Gro Intelligence (2022), Russia-Ukraine Crisis Ignites Fertilizer Prices at Critical Time for World Crops
[3] Rabobank (2022), Russia-Ukraine War's Impact on Global Logistics