We will all soon feel the “enormous impact” of Russia’s war on Ukraine with sharply higher food prices and significant disruption to agricultural supply chains. The situation is tipping into a full-blown crisis, potentially outstripping the Covid pandemic’s blow and pushing millions more into hunger.
The head of the World Food Programme agrees that the conflict could have a catastrophic impact on the world’s poorest, putting more people at risk of starvation worldwide. He added that “the bullets and bombs in Ukraine could take the global hunger crisis to levels beyond anything we’ve seen before.”
Goldman Sachs has said the world’s farmers have little spare capacity to increase acreage while crop nutrients are too expensive to increase yields.
The FT argues that the US farmers will be especially limited, writing, “After a poor harvest last year, domestic wheat stocks are at their lowest level in 14 years. Farmers have already seeded 34.4mn acres with winter wheat, which accounts for the majority of US production, and there is a worsening drought in important winter wheat states such as Kansas.”
China’s agriculture minister has said that China’s winter wheat crop could be the “worst in history.” He explained that heavy rainfall last year delayed the planting of about one-third of the regular wheat acreage.
AgResource has reduced its estimate for Brazilian soybean production to 119.5 mln mt. The company said that when you factor in potential losses in Argentina and Paraguay, 40 mln mt of soybeans could be lost due to poor weather.
Russia’s Prime Minister has said that he will prioritize grain supplies to domestic bakeries over export markets. The Russian government is already considering banning all grain exports to the Eurasian Economic Union until September.
Ukraine’s government has banned exports of rye, barley, buckwheat, millet, sugar, salt, and meat until the end of this year. Earlier, the country had introduced export licences for wheat, corn and sunflower oil, poultry, and eggs.
Egypt has banned the export of essential staples, including flour, lentils, wheat, pasta and fava beans. The government has meanwhile blamed greedy traders for rising food prices.
Indonesia has said it will further restrict palm oil exports to increase domestic supplies. LMC International has described cooking oils as facing a perfect storm, with as much as 60 per cent of sunflower oil exports from the Black Sea region delayed due to the war.
The UN FAO has warned that “before enacting any measures to secure food supply, governments must consider their potential effects on international markets.” The FAO added that “restrictions could help to resolve individual country food security challenges in the short term, but they would drive up prices on global markets.”
China’s President Xi Jinping has said that China can no longer rely on international markets to ensure food security and should focus on domestic production.
Asia’s preference for rice over wheat could limit the fallout from reduced Black Sea wheat exports. Food inflation is relatively contained in Asia, thanks to the popularity of rice and falling pork prices.
Cargill and ADM are scaling back their business activities in Russia but will continue to operate “essential” food facilities there. In a statement, Cargill said, “Food is a basic human right and should never be used as a weapon.”
Skyrocketing prices force physical commodities trading houses to seek additional financing for margin calls on their hedge positions.
Nestle and Mondelez have followed Procter & Gamble and Unilever in halting investment in Russia. However, the four companies will continue providing essentials to maintain “continuity” of the Russian food supply.
Higher fuel prices and increased transport costs could add to the already sharp rise in world coffee prices.
In shipping, Maersk is looking to divest its minority interest in Russia’s largest terminal operator.
Meanwhile, the war may lead to a global crew shortage as Ukrainians and Russians account for nearly 15 per cent of the industry’s 1.9 million seafarers and a high proportion of its officers and ranked crew. Ukraine has conscripted men under 60 and forbidden them to leave the country. Some 140 ships and 1,000 workers are trapped in Ukraine waters, although Russia appears to be letting some ships carrying grains leave the Azov Sea.
Consolidation continues in the container-shipping sector, with Hapag-Lloyd acquiring the container liner business of Deutsche Afrika-Linien (DAL).
The Brazilian government has presented a National Fertilizer Plan to reduce the country’s dependency on imports from 85 per cent of its demand to 45 per cent. Brazil is the world’s fourth-biggest importer of fertilizer.
Norway’s Yara, one of the world’s largest fertilizer makers, is curtailing ammonia and urea output in Italy and France due to the surge in natural gas prices.
In environmental news, new research finds that three-quarters of the Amazon rainforest may be speeding toward a “tipping point” that could transform it into a relatively dry savanna.
A new report estimates that in the US in 2018, around 235 million pounds of herbicides and insecticides were used on corn and soy crops destined for factory-farmed animals.
The Guardian writes that the US beef industry has escaped relatively unscathed from the US President’s pledge to cut methane gas emissions by 30 per cent by 2030.
Reuters reports that US ethanol producers are betting on carbon capture and storage (CCS) technology to lower their greenhouse gas emissions.
Maersk wants to jump-start the green methanol market to help them ditch fossil fuels. The company could buy at least 730,000 tons of methanol per year by 2025.
Bloomberg Green has an excellent video on how technology could help the global shipping industry ‘go green’.
Finally, Visual Capitalist has a good piece on the enormous scale of US food waste.
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