Guest Jack Nicas, the Brazil bureau chief for The New York Times
A dangerous cocktail of climate change, supply chain interruptions and social unrest was already threatening hunger and famine in the world’s poorest areas. Now, the Russian-Ukrainian war has added to this dangerous cycle to create a food crisis of seismic proportions. Will the lack of food inevitably create social, political and economic shocks?
Large parts of the world have already been facing food insecurity as a result of the changing climate and supply chain issues from COVID-19. Years of heightened climate change alone have cut global crop production by about 20%. Then, war happened. And, the results will be cataclysmic. Combined, Russia and Ukraine account for almost a third of the global production of wheat, and these two countries are among the world’s main providers of barley, sunflowers and maize. Human Rights Watch has warned that many countries will see disruptions in their imports of wheat, but also fertilizer, vegetable oils and other key commodities. Added to the rising cost of fuel to transport the food, global hunger may increase to up to 20%, according to the World Food Program.
We explore these themes with Jack Nicas, the Brazil bureau chief for The New York Times, who unexpectedly became the paper’s global food chain expert as he was researching a story about fertilizer shortages in Brazil. The war in Ukraine will inevitably be devastating for food production around the world, the extent of which we are not yet aware. We asked, “Can you give us a sense of how important Ukraine and Russia are to the world’s supply of food?” Nicas responded, “They are essential. They are the bread baskets, particularly for Europe, North Africa and the Middle East. Together, Ukraine and Russia account for about a third of the world’s wheat exports. But they also produce about 17% of the corn exports, about a third of the barley exports, and they make three-quarters of all the sunflower seed oil.”
Russia’s products are now limited by sanctions and export restrictions. Ukraine has seen farms turned into battlefields, and exports are suffering. Citing Josef Schmidhuber, an economist at the Food and Agriculture Organization (FAO), Nicas commented, “the latest signs are that, actually, the current harvests in Ukraine are strong. [The problem is] figuring out how to get the wheat out, harvest it, put fertilizer on the new crops.”
However, there are plenty of limitations and concerns. The first is storage. Nicas explained, “the grain elevators that are storing the wheat are full because they haven’t been able to export it. Now they don’t know where to put new wheat.” He mentioned some of the major concerns for exporting agricultural products: “There are weight limitations on the rail lines that are in Ukraine. The ports are blocked by Russia. Shippers don’t want to go into the Black Sea because there are warships there. Then there’s a real shortage of diesel fuel, which powers the tractors to harvest wheat because a lot of the diesel is routed to tanks.“
Nicas was particularly concerned about the production and storage of fertilizer. Fertilizer is in short supply and has become more expensive because of rising prices. Nicas explained, “Energy prices are way up because Russia is a huge oil and natural gas producer. You use natural gas to produce many of the most important fertilizers. That has caused many European producers of fertilizer to halt production or severely limit their production because it’s just not profitable for them anymore.” Fertilizer prices are soaring, limiting farmers’ ability to access remaining supply. He added, “that if farmers can’t get or afford the fertilizer, they’re not going to be applying it to their crops. That means in the next round of crops the yields will be lower. We will have less food to make up for the shortages that we’re already dealing with.” The neediest farmers will be the last to access any available fertilizer, compounding existing food insecurity.
For Nicas, this began in Brazil. What is the concern there? Nicas responded, “Brazil is highly dependent on Russia for a specific type of fertilizer called potash. This is a crucial fertilizer, especially for soybeans. Brazil is the world’s largest producer of soybeans. Soybeans are extremely important to feed the world’s animals, for the world’s livestock.” He explained more about potash. He said, “Potash largely comes from three countries- Canada, Russia, and Belarus. Belarus is Russia’s closest ally and is also facing its own sanctions related to some of the actions by the president there. So, the potash in Belarus has been blocked” So how are the Brazilian farmers accessing fertilizer? Nicas explained, “Brazilian buyers have found workarounds on the financial sanctions. They have basically found one Russian bank, Gazprombank, which is handling energy transactions, to be able to handle also payments for Russian fertilizer. And they’ve been able to find shippers to also bring it from Russia to Brazil.” Good news for Brazil’s soybean crop. Bad news for the effectiveness of international sanctions.
Looking at global political implications, Altamar’s Peter Schechter asked, “you talked about how the Arab Spring 10 years ago was in part triggered by high food prices. Do you fear some of these political implications in the developing world, particularly where people are so sensitive to higher food prices?” Nicas responded, “I think that that is a big concern. Historically for decades, particularly in North Africa and the Middle East, there has been a very clear link between higher food prices and social unrest. Already in Tunisia and Egypt, we’re seeing signs of unrest because of the cost of food. Alarming, But Nicas brought up an additional concern about heavily subsidized food products. He said, “As food prices have soared, it has created real solvency issues for some of these governments. And there’s a real question about whether entire economies are going to be sunk by these soaring food prices.”
We turn to another region of the world, Asia. Altamar’s Muni Jensen asked, “what about China and India, the World’s most populous countries? Nicas explained, “They have approached this a little bit differently in the sense that China, for instance, is a little more protectionist in its approach. So, it’s set its own export controls to try to retain a lot of the food inside of China. They have fewer qualms with buying food from Russia and buying fertilizer from Russia than other countries do. They seem to be able to get a lot of what they need right now.”
The world faces an impending global food crisis. We asked about a global call to action. Can anything be done? Nicas acknowledged the complicated nature of the problem. However, he suggested a proposal by the FAO economist Josef Schmidhuber. He said, we could “try to bring back a barter system, where places like Brazil would trade soybeans for Russian fertilizer. […] The Russians can eat; Brazil can get their fertilizer and you’re not paying with dollars that can then be rerouted to the war.” A creative solution, but can it work? He also emphasized the importance of funding organizations like the World Food Program which are forced to spend more on rising food prices. By the sound of it, we will need all of the solutions available.
What will the long-term impacts of the Ukraine war be on the global food supply? What are some other creative solutions? Find out more by listening to the latest Altamar episode, available wherever you get your podcasts. You can download the episode here.