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The Russia-Ukraine war drives grain prices higher

27 May 20224 min reading

The Russia-Ukraine conflict is driving food prices higher. Commodities that have been most affected are wheat, maize, edible oils, and fertilizers. Global commodity markets face upside risks through the reduction in grain supplies, higher energy prices, higher fertilizer prices, and trade disruption due to shutting down of major ports.

Many countries are facing growing levels of food insecurity, reversing years of development gains, and threatening the achievement of Sustainable Development Goals by 2030. Even before COVID-19 reduced incomes and disrupted supply chains, chronic and acute hunger were on the rise due to various factors, including conflict, socio-economic conditions, natural hazards, climate change and pests. The impact of the war in Ukraine adds risk to global food security, with food prices likely to remain high for the foreseeable future and expected to push millions of additional people into acute food insecurity.

While the outlook for global food supplies remains favorable, food prices increased sharply due to elevated input prices which, combined with high transport costs and trade disruptions due to the war in Ukraine, are raising import bills. That hits poor and developing countries hardest, as they depend on food imports the most.

As of May 19, 2022, the Agricultural Price Index is up 42% compared to January 2021. Maize and wheat prices are 55% and 91% higher, respectively, compared to January 2021, while rice prices are about 12% lower. Domestic price inflation remains high. Between January 2022 and April 2022, 92.9% of low-income countries, 84.2% of lower-middle-income countries, and 78% of upper-middle-income countries have witnessed inflation levels above 5%, with many experiencing double-digit inflation.

According to the World Bank’s April 2022 Commodity Markets Outlook, the war in Ukraine has altered global patterns of trade, production, and consumption in ways that will keep prices at historically high levels through the end of 2024 exacerbating food insecurity and inflation.

Numerous countries are experiencing high food price inflation at the retail level, reflecting labor shortages, a sharp rise in the price of fertilizer, currency devaluations, and other factors. Rising food prices have a greater impact on people in low- and middle-income countries since they spend a larger share of their income on food than people in high-income countries.

Food prices were already high before, and the war is driving food prices even higher. Commodities that have been most affected are wheat, maize, edible oils, and fertilizers. Global commodity markets face upside risks through the following channels: reduction in grain supplies, higher energy prices, higher fertilizer prices, and trade disruption due to shutting down of major ports.

Over the coming months, a major challenge will be access to fertilizers which may impact food production across many crops in different regions. Fertilizer prices surged in March, up nearly 20% since January 2022 and almost three times higher compared to a year ago. Russia and Belarus are major fertilizer exporters, accounting for 38% of potassic fertilizers, 17% of compound fertilizers, and 15% of nitrogenous fertilizers.

Following the start of the war in Ukraine, trade-related policies imposed by countries have surged. Since the beginning of 2022 until May 19, 268 policy measures have been announced and implemented by 75 countries. The number of policies on food and fertilizers (85%) surpasses the number of policies on raw materials and fuels (15%).

Globally, hunger levels remain alarmingly high. In 2021, they surpassed all previous records as reported by the Global Report on Food Crises 2022, with close to 193 million people acutely food insecure—nearly 40 million more people than during the previous high reached in 2020. Conflict and insecurity are identified as the main drivers of increased food insecurity.

Rapid phone surveys done by the World Bank in 83 countries show a significant number of people running out of food or reducing their consumption in the first two years of the COVID-19 pandemic. Reduced calorie intake and compromised nutrition threaten gains in poverty reduction and health and could have lasting impacts on the cognitive development of young children.


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