World Food Crisis Impacted by Conflict and War

According to a report by the World Food Program earlier this year, more than 200 million people in the world today are in in danger of starvation, and their rank threatens to grow by another 100 million in this year alone. This dramatic estimate for 2022 was issued even before the ongoing military conflict in Europe. In Afghanistan, 23 million people, including millions of children, are “marching toward famine”; in the tiny, war-torn country of Yemen, over 40% of the population (13 million people) depend on donations from the WFP to survive, while the Horn of Africa is experiencing the worst drought in decades. At the same time, food supplies are becoming scarcer.

As of the end of last year, world wheat output was already set to drop by about 10 million tons in 2022, according to the French agriculture analysis firm Agritel. The decline in maize production is expected to be even worse as production costs are increasing by 15 to 20%, while the 2022 oilseed harvest is forecast to drop for the fourth year in a row. As for fertilizers, prices had already tripled between2020 and the end of 2021, making them unaffordable for countless independent farmers around the world. The catastrophic drop in agricultural production worldwide is due in part to rising energy prices under the various “green deal” policies, but also to geopolitics and conflicts.

The conflict in Ukraine and the sanctions being prepared against Russia will aggravate the situation tremendously, in particular if shipments via the Black Sea are blocked. Ukraine and Russia together account for just under 30% of all the wheat traded on world markets today, Russia being the number one exporter worldwide and Ukraine the fifth. They also provide together 32% of global barley exports, 19% of global maize exports, and nearly 80% of global sunflower oil exports.

Chemical fertilizers are of course essential for modern agriculture, and Russia and Belarus are both major suppliers to the world market. In fact, according to ARGUS Media, Russia is the number one exporter of several commodities: ammonium nitrate (49% of market share), NPK (nitrogen, phosphorus and potassium, 38% share), ammonium (30% share) and Urea (18%).

In terms of potassium (potash), Belarus and Russia together rank first in production worldwide, with 9.0MMT for Russia and 8.0MMT for Belarus, with Canada being the number one single producer, at 14.0MMT.

If Russia is effectively cut off from the world banking system due to the sanctions now threatened by the United States and Europe, the disruptions to the world food supply will be dramatic. However, it was just announced this week that China, under the agreement reached by Presidents Xi and Putin will ease restrictions on wheat imports from Russia and could thus absorb a large part of the exports that might be subject to sanctions. At the same time, according to a new Goldman Sachs report, China is expected to be the main “benefactor” of other Russian commodities and raw materials should the regular exports be cut.