Food prices around the world, including in India, skyrocketed this year after Russia’s invasion of Ukraine. The ongoing Russia-Ukraine war has a detrimental impact on key exports of wheat and fertiliser from those countries. At the same time, droughts, floods and heat fuelled by climate change have affected harvests.
Wheat prices hit a 14-year peak in March, and maize prices reached the highest ever recorded, the International Panel of Experts on Sustainable Food Systems (IPES) said in a report released last week. That has made basic staples more expensive – or harder to find – for families in many countries, especially the poorest.
RISK TO GLOBAL FOOD SECURITY
Climate change, widespread poverty and conflicts are now combining to create “endemic and widespread” risks to global food security – which means higher food prices may be the new normal, unless action is taken to curb the threats, IPES noted, as per a Reuters report.
The IPES report suggests not only cutting emissions swiftly to limit climate change but also tackling commodity speculation, giving debt relief, cutting reliance on chemical fertilisers, reshaping trade and shoring up national grain reserves.
If these things are neglected, the world will find itself “sleepwalking into the catastrophic and systematic food crises of the future”, the IPES experts noted.
WHY ARE FOOD PRICES SO HIGH?
- Russia and Ukraine supply about 30 per cent of global wheat exports, but those have fallen as a result of the ongoing crisis.
- But the drop in exports from Russia and Ukraine has driven up competition for the remaining wheat on the global market, leading to higher costs that are particularly painful for poorer, debt-ridden countries that rely heavily on imports.
- But the disruption to wheat exports from Russia and Ukraine is not the whole reason for the price hikes, which have spilled over into maize, rice and soy markets as buyers seek alternative grains.
- Spurred by the conflict, financial speculators have leapt into trading in grain futures, for instance, “artificially” inflating prices as they seek to profit from market uncertainty, G7 agriculture ministers have complained.
Since the last food price crises of 2007-2008 and 2011-2012, “governments have failed to curb excessive speculation and ensure transparency of food stocks and commodity markets,” said Jennifer Clapp, a professor specialised in food security at Canada’s University of Waterloo.
The problem “must be urgently addressed” if the world wants to ensure more stable food prices in coming years as climate change, conflict and other threats drive up risks, she added.
IMPACT OF CLIMATE
- Some wheat-growing countries are already planting more, and India has said it will boost exports of wheat to meet demand, although its current heatwave could dent yields, the London-based Energy and Climate Intelligence Unit warned.
- But efforts to boost production globally have been hampered by shortages of chemical fertiliser. Russia and Belarus produced 40% of international potash exports last year and that trade has also been hit by the war.
- Climate change impacts – from droughts and heatwaves to flooding and new pests – also are making it harder for farmers in many parts of the world to get a reliable crop, a problem set to worsen as planet-heating emissions continue to rise.
- As well, the land available to plant more wheat, maize and rice is limited, with expansion of farmland – particularly in countries such as Brazil – often coming at the expense of forests that are key to keeping the climate stable.
- With a limited supply of land under increasing pressure from those trying to grow food, protect nature, install renewable energy and store carbon, land may become the strategic global asset of this century, said Tim Benton, research director of the environment and society programme at think-tank Chatham House, as per the Reuters report.
- A desire to control more Ukrainian farmland – and more of the future global food market – could even be one of the drivers of Russia’s invasion, he noted.
SITUATION IN INDIA
The adverse effects of the unprecedented high global food prices due to the ongoing geopolitical situation are reflected in the domestic market as well, and going forward inflationary pressures would likely to continue, Reserve Bank of India Governor Shaktikanta Das said last week while announcing decisions taken at an off-cycle Monetary Policy Committee (MPC) meeting of RBI.
The central bank has projected that retail inflation will be at 5.7 per cent in the current financial year.
“High frequency price indicators for April indicate the persistence of food price pressures. Simultaneously, the direct impact of the increases in domestic pump prices of petroleum products beginning the second fortnight of March is feeding into core inflation prints and is expected to have intensified in April,” the RBI Governor said while reading out his statement.
Looking ahead, food inflation pressures are likely to continue, he said.
“Spillovers from global wheat shortages are impacting domestic prices, even though domestic supply remains comfortable. Prices of edible oils may firm up further due to export restrictions by key producing countries and the loss of sunflower oil output due to the war. Elevated feed costs are translating into an escalation in poultry, milk and dairy product prices,” Das said.