UN-chartered vessel MV Brave Commander loads more than 23,000 tonnes of grain to export to Ethiopia, in Yuzhne, east of Odessa on the Black Sea coast on Aug. 14.OLEKSANDR GIMANOV/AFP/Getty Images
Nancy Qian is professor of managerial economics and decision sciences at Northwestern University’s Kellogg School of Management and the founding director of China Econ Lab and Northwestern’s China Lab. She leads the Kellogg development economics initiative.
Russia’s blockades of Ukrainian food shipments and the potential loss of Ukrainian harvests owing to the war have dominated headlines in recent months. Between February and June, global wheat prices surged by more than 60 per cent, fuelling humanitarian concerns and warnings from international development agencies about increased food insecurity in poor African and Asian countries. There has also been much concern about potential fertilizer shortages, because they could reduce the supply of food and increase its price globally.
But many of these headlines have been misleading.
In poor countries, around 80 per cent of all calories come from cereals. The most important cereal is rice, which accounts for 27 per cent of per capita caloric intake in the developing world, and is the main staple in Asia. In Africa, meanwhile the most important cereal is maize; around 30 per cent of the world’s maize is consumed by African countries. Wheat, the second most important cereal globally, is relatively unimportant in poor countries, where it is not really consumed.
Now, consider Ukraine’s contribution to the global food supply. In 2020, it exported very little rice, and it was the fifth-largest exporter of wheat (after Russia, the U.S., Canada and France) and the fourth-largest exporter of maize (after the U.S., Argentina and Brazil). Ukraine also only accounts for 0.8 per cent of the world’s fertilizer exports.
So the loss of Ukrainian wheat and maize should not, by itself, trigger food insecurity in poor countries – especially since production and exports from other countries can increase.
Consider maize. The poor countries that rely on maize produce most of it domestically, and very little of what they import comes from Ukraine. For example, Kenya imported only 11,818 tons from Ukraine in 2020. Deficits of that size should be relatively easy for other producers to fill, especially given that most maize is not needed for human subsistence: Globally, only 15 per cent of all maize produced in the world is consumed as food, and in the U.S. – the world’s largest maize producer – 10 to 12 million tons per year are used to produce sweetener.
Other producers should also be able to compensate for the loss of Ukrainian wheat. Past production shows that many countries are not currently at full capacity. For example, increasing U.S. wheat exports from recent levels of 26 million tons to their 1981 peak of 44 million tons would more than make up for the loss of Ukraine’s total wheat exports.
But this does not mean that food-insecurity concerns are overblown. The problems are just different and more complex than what is being implied.
Food insecurity has been steadily worsening for years. In low-income countries, the share of people suffering from a lack of sufficient high-quality nutrition rose from around 13 per cent in 2015 to 26 per cent in 2019, owing to the interplay of factors such as climate change, failing institutions, and regional armed conflict. To associate the problem solely with Russia’s war in Ukraine risks creating a false assumption that it can be fixed or significantly ameliorated by ending the war in Eastern Europe.
The Russian invasion of Ukraine can indeed reduce global food supplies in the short run, especially when there are disruptions to shipping lanes and access to ports. But the bigger long-run danger is that Russia will reduce exports.
Russia accounts for 19 per cent of the world’s wheat exports and 15 per cent of its fertilizer exports. Exports could decline because of war, bad weather, or an economic crisis that derails production. It could decline for political reasons, such as a Russian gambit to leverage its market power, as Moscow has done with gas. Conversely, Ukraine and its allies may seek to increase the economic pressure on Russia by demanding a ban on its agricultural exports, which have thus far been exempt from trade sanctions. Political hostilities are likely to continue even after the end of the armed conflict.
Given these risks, a sensible response for the U.S. and its agriculturally productive allies is to increase crop production and augment reserves. With larger reserves, small amounts can be more readily released to help smooth over temporary deficits. These policies would also send a strong signal to farmers to keep up production capacity, which will help ensure the ability to pursue even greater production should the need arise.
Increasing production and reserves will, in time, also reduce global dependence on Russian agricultural exports, giving Ukraine’s allies more room to politically manoeuvre. For poor countries facing the growing threat of chronic food insecurity, these policies would also provide insurance against mass starvation.
The food crisis triggered by the Russia-Ukraine war highlights acute food-insecurity challenges, but a closer look shows that the problems run far deeper than the current war. Ultimately, the global food system urgently needs to become more resilient.
Copyright: Project Syndicate, 2022.
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