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Rising prices and food crisis in times of war. Background in the iPES FOOD report

The rise in food prices and the worsening of the dramatic situation in which large sections of the world population find themselves as a result of the Ukrainian crisis are exacerbated by known and never remedied distortions of the food systems. The same anomalies constantly threaten global food security, understood as access to food (food security). IPES FOOD dedicates a special report with an eloquent title to the theme: 'Another perfect storm?'. (1)

Rising food prices, the impact of the Ukrainian crisis

The tragedy of deaths, injuries, displaced people and the destruction of what has been built in entire lives of work is added to hunger as a systematic consequence of violence. In Ukraine as in over 40 active conflict zones around the world - Yemen, Syria, Afghanistan, Ethiopia, Sahel, .. - to the detriment of more than two billion people, half of whom are in conditions of extreme poverty.

The effects of the Russian-Ukrainian conflict severely reverberates, inter alia, on global agri-food markets. In fact, the blocking of Ukrainian and Russian grain exports is compounded by restrictions on at export taxes in 20 countries. To protect the domestic market from price volatility, but also to create temporary shortages and price rises.

Price increases from hunger

Rising prices of the food (and energy and commodities) we are facing in advanced economies are capable of exacerbating hunger in many of the world's poorest and most vulnerable regions.

Prices of wheat peaked in 14 years in March, + 20% compared to February and + 34% in one year, according to FAO. Corn has also hit record prices, due to poor harvest forecasts. And the surge in fertilizer prices - with the stop of Russian and Ukrainian ones - exacerbates the crisis for 'conventional' farmers. (2)

Africa most at risk

Africa it is the region most at risk. Almost the 40% of imports Total African grain comes from Russia and Ukraine. In Eritrea it represents 100%. In Somalia more than 90% and in the Democratic Republic of the Congo more than 80%.

The price of bread it nearly doubled in Sudan and increased by 70% in Lebanon. Meanwhile, price volatility is already spreading across the soy, corn and rice markets.

According to the FAO, the global number of undernourished people will increase by 13,1 million in the short term (2022/23), of which 6,4 million in Asia-Pacific and 5,1 million in sub-Saharan Africa. After the pandemic, the war. And the UN goal of eradicating hunger by 2030 seems further away.

The structural weaknesses of food systems

To amplify the effects of the conflict in Ukraine on food security contribute to a series of malfunctions of the agri-food systems that have already emerged in the global food price crisis of 2007-2008, in the subsequent price spikes of 2010-2012 and in the Covid-19 crisis in 2020-2021.

iPES FOOD analyzes its fundamentals.

Dependencies on food imports

In the face of crises like the current one, some countries are highly vulnerable to an addiction from imported food (and fertilizers) which derives from various phenomena. Already in the colonial era, the change in the traditional diet began with the introduction of crops of wheat, rice and corn. The same are then conveyed through international aid, even in countries where it is impossible to cultivate them.

At the same time, even where these crops were in use, income crops took over. In Africa, the transition began with i structural adjustment programs in the 80s. But the trend is widespread.

For example, it is believed that the cultivation of tobacco replaced vegetables and legumes in Bangladesh, as well as cassava, millet and sweet potatoes in a number of African countries.

The development of high-yielding wheat varieties during the 'green revolution', on the other hand, led to the replacement of legumes and rice with wheat monocultures.

The grain merchants club

To exacerbate the difficulties of many countries is the dependence on a limited number of exporters. According to USDA data, only 7 countries plus the EU account for 90% of world wheat exports and only 4 countries account for 87% of world corn exports.

The merchants world wheat are instead four companies, which control 70-90%. They are known as ABCD, namely Archer-Daniels Midland, Bunge, Cargill, Dreyfus. These giants, along with silo operators and large farmers, certainly hold large reserves of grain, although the data is secret.

The spiral of debt

The same countries dependent on imports are also heavily indebted. This creates a vicious circle in which the need for liquidity to pay off debts and import food prevents any better investments for the future.

Despite the repeated promises - at each crisis - to intervene on the debt of disadvantaged countries, nothing has been done. In 2020, in full pandemic, 62 developing countries they spent more on repaying debt than on health care.

The stress caused by the 2007-2008 price crisis and dependence on food imports was the cause of popular uprisings with dramatic results, recalls iPES FOOD. But the past doesn't always teach.

Unsustainable agricultural production

In response to rising food prices and growing food safety concerns, Demands to countries to shift production models have increased: from fuel to food, from feed to food or from export-oriented income crops to commodities for local consumption. (3)

To brake this transition to sustainable, resilient and diversified food systems, however, there are several obstacles:

- the monoculture specialization (in the US 'corn belt' or Argentina's 'soybean belt', for example) relies on massive investments, training, equipment, logistical networks and support policies that are impossible to dismantle in one fell swoop,

- the production of biofuels is increasingly incentivized by governments, in the face of rising oil and gas prices,

- the food systems, the supply chain and the food industry are now strongly structured on the current global systems of exchange of wheat and corn,

- farmers around the world are increasingly dependent on synthetic fertilizers. Global demand for the top three (nitrogen, phosphate and potassium) increased by 8,5% from 2002 to 2016. Only 6 crops (corn and wheat primarily) account for two-thirds of demand and a handful of exporting countries dominate in trade. The tragedy is that the more synthetic fertilizers are used, the more the soil becomes impoverished, again filled with the same fertilizers to have rapid and abundant harvests.

Markets between opacity and speculation

Another flaw at the bottom of which turned the Ukrainian crisis into a global food security crisis is the opaque and dysfunctional nature of the highly speculated grain markets.

Some countries they have increased the sowing of wheat in anticipation of the Russian invasion: India, Australia, United States, Canada, Argentina and South Africa.

Currently, the relationship between stock of cereals and global consumption is at 29,7% (slightly down from 29,8% in 2020/2021) and remains satisfactory and only slightly below previous years for wheat (35,3%) and corn (25,8 , 37%); at XNUMX%, the ratios between stock of rice and consumption are actually higher than in previous years.

'Supply disruptions are occurring as new / diverted grain shipments are expected, leading to temporary shortages and rising prices, but there is currently no global food supply shortage'says iPES FOOD.

The financialization of raw materials

An important role in the shock on prices it then goes to speculation on raw materials, favored by the lack of transparency, in particular on cereal stocks. THE futures raw materials play an important role in determining the prices of cereals, provide liquidity to the markets and thus make them work.

However, 'excessive speculation' alters the logic based on supply and demand. And when food is the object of the 'bets', the poorest people in the world are affected. In 2007-2008, a massive influx of speculative financial investments contributed to the surge in the prices of futures and what is now called a global food price crisis.

Poverty and food insecurity

Another structural weakness that the current crisis has exposed is the fact that hundreds of millions of people do not have the income or the resources to adapt to shock sudden.

More than 50% of farmers and rural workers live below the poverty line in several southern countries with the largest rural population.

The poorest populations in low-income countries they spend over 60% of their income on food. Under this condition, even small price increases can have devastating impacts, vulnerabilities that have been cruelly exposed by the Covid-19 pandemic.

Climate change

- shock climate they now regularly plague agriculture, creating persistent vulnerability and uncertainty in global markets. The IPCC estimates that climate change has reduced agricultural productivity growth by 21% since 1961 and by up to 34% in Africa and Latin America.

The main regions agricultural they are currently facing the worst drought in decades, including much of West Asia and North Africa, the Horn of Africa, parts of Brazil and Argentina, and the North American Midwest.

Famine and instability

After four years without rain and years of unsustainable resource management (including through mining practices), the Madagascar is facing famine.

Lo Sri Lanka is experiencing the worst economic crisis of the past 70 years, including food shortages and power outages, as spikes in global food prices have combined with economic mismanagement, including a failed transition to organic farming.

The countries of the Sahel (Burkina Faso, Mali and Niger in particular), Kenya, Ethiopia, Sudan and South Sudan were already experiencing socio-economic instability and shock before the Ukrainian crisis and are now particularly vulnerable.

According to the Global Crisis Response Group of the United Nations, approx 69 countries - home to 1,2 billion people - are severely or significantly exposed to instability food, energy and financial.

In this context, too underfunded humanitarian agencies they struggle to keep up. Even social safety nets in rich and middle-income countries are under pressure. In the United Kingdom, the fifth largest economy in the world, 1 in 10 households are likely to tap into the food banks as food prices rise in the coming months.

Myopic solutions

In the face of the crisis, there was no lack of short-sighted solutions. Three examples.

A) Suspension of environmental regulation to 'feed the world'

At the G7 in April 2022, World Bank President David Malpass called for more food, energy and fertilizer production. IFPRI (International Food Policy Research Institute) immediately called on wheat producers to do everything possible to increase production.

In this vein, the purposes of the EU are threatened Farm2Fork: by 2030, halve pesticides, reduce fertilizers by 20%, convert 25% of agricultural soils to bio and restore 30% of peatlands.

Pressed of lobby agricultural, the European Commission has postponed two key legislative proposals - the regulation on sustainable use of pesticides (SUR) and nature restoration objectives - and allowed Member States to cultivate (including with chemicals) on land previously designated as 'ecological focus areas'. Similar measures have been proposed in the United States.

In Brazil, the president Jair Bolsonaro he said that the increase in fertilizer prices justifies the continued exploitation of the Amazon, including in indigenous lands, in search of minerals.

These policies, which exploit crises to demolish sustainable development, are defined by Naomi Klein the 'doctrine of shock'.

B) New loans to AGRA

To answer the effects of the current high prices on African countries also started the request to increase funding for the Alliance for a 'green revolution' in Africa (AGRA), launched in 2006 with the aim of 'reducing food insecurity by 50% in at least 20 countries and double the incomes of 20 million smallholder households by 2020.

The program is largely funded by the Bill and Melinda Gates Foundation, but about a third of the $ XNUMX billion spent over the past decade comes from other multilateral agencies, including USAID, UKAID and the German Department of Development Cooperation (BMZ).

The stated objectives are still there. And one wonders whether the search for an additional billion dollars by 2030 is appropriate, given that independent analyzes show a 31% increase in hunger in the countries where AGRA operated between 2006 and 2018.

C) New organisms and fragmentation

Another problem is the hasty creation of new organizations to deal with crises. A modus which ends up creating overlaps with pre-existing organisms, weakening their role.

For the Ukrainian crisis, a end of April, the German development minister has called for the creation of a new alliance for food security global, bringing together donor countries, international organizations and the private sector to address the effects of the war in Ukraine and coordinate the distribution of food aid. And a Global Crisis Response Group (GCRG) of the United Nations on food, energy and finance.

In addition, the crisis has sparked new demands for the creation of a scientific panel - an IPCC for Food'- to accelerate scientific advice to policy makers.

How to avoid the next 'perfect storm'

The full-bodied iPES FOOD special report concludes with the recommendation to adopt 5 measures to address the emergency and initiate a transformation of the food system.

1 - Provide financial assistance and debt relief to vulnerable countries,

2 - Repress speculation on commodities, including by introducing a tax on index-linked funds on these commodities,

3 - Build regional grain reserves and a global food aid apparatus suitable for protracted crises,

4 - Diversify food production and trade systems. Moving to more resilient crops adapted to the local context (water stress, for example) and overcoming the logic of the WTO (World Trade Organization) that allowed highly subsidized agriculture in the North of the world to decimate domestic production in other regions .

5 - Rebuild resilience and reduce harmful addictions through diversity and agroecology, overcoming the dominance of industrial agriculture which once again proved to be unsuccessful in facing a crisis.

Marta Strinati

Notes

(1) iPES FOOD. Special Report. Food Price Crisis. Another Perfect Storm? https://ipes-food.org/pages/foodpricecrisis

(2) The increase in fertilizer prices is now skyrocketing and the shortage is looming. Russia, Ukraine, China and Kyrgyzstan have imposed restrictions on fertilizer exports and Belarusian ones are sanctioned from 2021. Russia and Belarus together provide 40% of the world's potash fertilizer; in 2021, Russia was also the leading exporter of ammonium nitrate fertilizers (49% of global export markets) and NPK products (38%), ammonia (30%) and urea (18%).

(3) Greenpeace urged the EU to shift the production of forage crops for intensive farming to food crops for human consumption, arguing that only 8% of the EU's forage crops would be diverted to compensate for the loss of imports. of cereals from Ukraine and guarantee access to food for the poorest inhabitants of the bloc. https://www.greenpeace.org/eu-unit/issues/nature-food/46105/reduce-eu-meat-factory-farming-to-replace-ukraines-wheat/ 

A letter signed by hundreds of scientists suggests that switching to organic farming on 25% of EU land - as required by the EU 'Farm to Fork' - would allow Europe to drastically reduce imports of nitrogen fertilizers and thereby reduce exposure to rising prices and shortages.

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Professional journalist since January 1995, he has worked for newspapers (Il Messaggero, Paese Sera, La Stampa) and periodicals (NumeroUno, Il Salvagente). She is the author of journalistic surveys on food, she has published the book "Reading labels to know what we eat".

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