Wealthy Dutch people will more often choose bread from Lidl instead of the bakery. In Cameroon, bakers are replacing imported wheat flour with local cassava or cornmeal. And in Afghanistan, there is a danger that hunger will become hopeless to millions of people.
Since the start of the war in Ukraine, the price of wheat on the world market has risen by about 50 percent. The consequences are felt in large parts of the world. Wheat is, after all, a staple food for about 30 percent of humanity. Only rice is even more important in this regard.
The UN fears that this disruption will put millions of poor people in dire straits. Last year, more than 190 million people in the Congo, South Sudan, Afghanistan and Nigeria, among others, found themselves in a situation of food crisis or worse: an acute emergency or a famine, the term reserved for situations where part of the population dies if immediately as a result of malnutrition.
The situation in 2021 was an “alarming deterioration” from the previous year, it sounded last week Global report on food crises, prepared by the UN together with other international organizations. This year it is expected to get worse. Global hunger “has reached a new high,” UN chief Antonio Guterres said last week.
Wheat – although it is certainly not the only raw material that has become prohibitive for many – is one of the main ingredients in this food crisis. Three phenomena determine the lack of wheat at an affordable price: the war, the weather, and the pandemic.
The war in Ukraine: an acute market disruption
The world is “heading for the biggest food crisis of our time,” US Secretary of State Antony Blinken told the UN Security Council last week. As a direct cause, he pointed to the Russian naval blockades of the ports of Odessa, Mariupol and Kherson, where 90 percent of Ukraine’s wheat is normally exported. Russian President Vladimir Putin “uses food as a weapon,” the minister said, “to break the will of the Ukrainian people.” His German colleague Annalena Baerbock even spoke of a “wheat war”.
Ukraine was the fifth largest wheat exporting country in 2020 (the last year for which the UN agricultural organization FAO has complete data). Some countries are heavily dependent on Ukraine: Djibouti and Somalia buy half of their wheat there, Lebanon even 60 percent. They will have to look for alternative suppliers. For even if Russia withdraws its warships tomorrow, it will take time to neutralize the mines located in the Black Sea.
Neighboring countries offer Ukraine help to export the grain – in addition to wheat also corn, rye and barley – over land, for example through lenient border controls, but there are also obstacles there. For example, transport by train to Poland is difficult because the Ukrainian track is wider than the European one, which means that the grain has to be transhipped at the border. Trucks are also, at best, a partial solution.
The war affects agriculture in many other ways. For example, silos have been destroyed, farmers have been able to sow less spring wheat as a result of the fighting, and many of them have had to flee or enlist in the army. Farmers in bulletproof vests perform their work near the front lines. Important tools are stolen in occupied areas. For example, CNN reported that looted combine harvesters and tractors from a John Deere dealer in Melitopol could be tracked in Chechnya via the built-in GPS trackers.
The high market price may make it attractive for farmers in other countries to sow more winter wheat next autumn, but that consideration depends on several factors. For example, the price of fertilizer plays a role that has also risen sharply due to the war. Less fertilizer leads to less grain and therefore a lower yield. Some farmers in the United States therefore choose soy, for example, which requires less fertilization.
It is still unclear to what extent Russia – as the number one wheat exporter – suffers from or benefits from the war. UN Ambassador Vassili Nebenzia portrayed his country in the Security Council as a victim: Western sanctions prevent Russian ships from entering foreign ports and are difficult to insure. Also payments through Russian banks that have been expelled from the international payment system Swift have become impossible.
At the same time the American newspaper Wall Street Journal that large commodity multinationals like Cargill and Glencore still manage to get wheat, corn, barley and flaxseed out of the country. They would not say how. Egypt, which is heavily dependent on imports from both Ukraine and Russia, ordered almost six times as much Russian wheat in March as a year earlier.
Extreme weather in large wheat fields
Not only Ukraine and Russia but also some other of the largest wheat producing countries are currently experiencing problems. China’s agriculture minister, the world’s largest wheat producer, warned in March that this summer’s winter wheat crop could become “the worst in history.” The reason is unusually heavy rainfall in the autumn, which has delayed sowing.
International experts suspect, based on satellite images, that the minister has exaggerated, possibly to keep local authorities on their toes, but also to undertake a disappointing harvest. The shutdowns in China have slowed down the domestic distribution of, among other things, artificial fertilizers. Although Chinese wheat is mainly for domestic consumption, world trade will certainly notice if China produces less: then the country will have to import more to its huge population.
In mid-April, Indian Prime Minister Narendra Modi said his country could send food aid “from tomorrow” to countries in need because of the war. “We already have enough food for our people.” A month later, the situation was reversed: a series of unusually early heat waves had made the wheat crop disappointing. When food inflation turned out to have risen to 9 percent in April, the government knew enough and introduced an export ban on wheat with a few exceptions. The ambition to become an important wheat-exporting country and make a lot of money from the high market price had to be shelved for the time being.
The wheat crop in neighboring Pakistan has also suffered from extreme weather. According to the Meteorological Service, March and April were the “warmest and driest” in Sindh province since measurements began in 1961. As a result, the grains remain smaller and contain less starch.
In the United States, the second largest wheat-exporting country after Russia, more than half of the states are experiencing drought. In some places it is so serious that farmers have to write off some of the winter wheat. In France, the largest producer and exporter in the EU, the month of May threatens to become one of record high temperatures and lack of rainfall. Farmers reserve their irrigation quotas for their wheat fields at the expense of other crops.
Like in the US, the growing season in France is not over yet and the damage may not be so bad. But the worries about the weather are increasing the tremors that the war has caused in the market. The hope was that the French harvest could to some extent compensate for the loss of Ukrainian wheat, but it is uncertain whether this will be the case. “I have never seen a more complicated market than today,” said Dan Basse, director of Chicago agricultural consulting firm AgResource, last week.
No recovery after the corona pandemic
The wheat problems show that the damage caused by the corona pandemic to the global economy is far from being repaired. Sky-high tariffs for freight transport by ship have calmed down a bit, but there are fears that they will skyrocket when Shanghai comes out of the lockdown and the cargo waiting there has to go out to sea. The rising energy prices, caused by countries coming out of lockdown and starting to produce again, seemed to calm down earlier this year but have risen again due to the war.
In addition, many governments in low- and middle-income countries have difficulty following a two-year pandemic. Stopped trade, lack of tourism revenue and dried up money transfers (the amounts that residents of the diaspora transfer to their families at home) have reduced their foreign exchange to import wheat and other basic necessities.
In Sri Lanka, dissatisfaction with this has already broken out in popular protests, which have been violently crushed. The new prime minister, who is to restore order, has warned that “it will get worse before it gets better”. He does not seem to say a word too much: inflation in Sri Lanka was 30 per cent in April, the price of bread rose by a further 20 per cent last week.
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