Russia’s invasion of Ukraine accelerated the crisis. Before the war, the two countries accounted for almost 30% of the wheat traded in the world. Ukraine supplied about half of the world’s sunflower oil exports and Russia an eighth of its fertilizer exports. Sanctions against Russia have further inflated energy prices, making fertilizer even more expensive.
The global consequences of a protracted war could be disastrous. High input costs could deter many small farmers from planting more, preventing supply from meeting demand and increasing volatility. With the strengthening dollar, many countries will struggle to pay for major food and fuel imports. Price spikes and shortages could cause unrest, as happened during the Arab Spring in 2011, while pushing millions of people into extreme poverty.
Governments compound the problem with protectionism. Since Ukraine’s invasion, at least 20 countries have imposed restrictions on food exports, covering around 17% of calories traded globally, including Indonesia’s decision to block crucial oil shipments. webbed. Such restrictions risk triggering a cascading effect and driving up prices for everyone: they are estimated to have accounted for a 13% rise in global food prices during the 2008-2011 food crisis.
The pressure on the global food supply requires a coordinated response. Foreign ministers meeting at the United Nations next week to discuss food security are expected to pledge not to add new trade restrictions and to lift those already imposed as soon as possible. At the June ministerial meeting of the World Trade Organization, countries should seek a more binding agreement, at the very least so as not to block shipments of food needed for humanitarian purposes. They should also share whatever information they have about inventory and shipping logistics, so markets don’t panic unnecessarily.
Countries should also roll back policies that take food off the market in times of need. The United States in particular should consider temporarily suspending mandates for biodiesel, which sucks up more than 40% of the country’s soybean oil. Congress should also suspend requirements that half of US food aid must be shipped by US carriers. It would be cheaper and more efficient to fund WFP’s efforts to purchase supplies closer to where they are needed.
While rightly focusing on defense aid to Ukraine, Western countries will also need to increase their aid to the developing world. Already stretched fiscally to cope with the pandemic, poor countries need help to subsidize fertilizers, strengthen safety nets and shore up their macroeconomic positions. In addition to direct aid, the G-20 can follow through on pledges to reallocate $100 billion in so-called International Monetary Fund special drawing rights to vulnerable nations, and make it easier for them to seek relief from debt.
Finally, governments should let markets work. Early indications suggest that US and European farmers are responding to higher prices by planting more. Officials can best encourage such choices by getting out of the way. In such a complex crisis, the first principle should be to do no harm.
More other writers at Bloomberg Opinion:
Food supply is a national security issue: Amanda Little
The other oil crisis will lead to a hungrier world: David Fickling
Sustainable diets could prevent global famine: Gidon Eshel
The editors are members of the Bloomberg Opinion Editorial Board.
More stories like this are available at bloomberg.com/opinion