29.06.2022 |

Rising wheat prices will put millions at risk of hunger, OECD/FAO

Consumers in many countries depend on cereal from Ukraine and Russia (Photo: CC0)

The war in Ukraine is threatening global food security at a time of already elevated global commodity prices and could lead to an increase in the number of undernourished by close to 19 million people in 2023, according to the UN Food and Agricultural Organization (FAO) and the Organisation for Economic Co-operation and Development (OECD). The goal of eliminating hunger by 2030 is thus unlikely to be achieved. A new report, released by the two organisations on Wednesday, warns that prices of agricultural products have been driven upward by a combination of factors, including the recovery in demand following the outbreak of the COVID-19 pandemic and the resulting supply and trade disruptions, poor weather in main supplying nations, and rising production and transportation costs. This trend has been further exacerbated recently by the impact of the war on agricultural exports from Ukraine and Russia, two main suppliers of cereals. “Without peace in Ukraine, food security challenges facing the world will continue to worsen, especially for the world’s poorest,” OECD Secretary-General Mathias Cormann said. “An immediate end of the war would be the best outcome for people in both Russia and Ukraine and for the many households around the world that are suffering from sharp price increases driven by the war.”

The “OECD-FAO Agricultural Outlook” is published by the two organisations each year and presents production, consumption, trade and price trends for the main farm and fisheries products at regional, national and global levels for the coming decade, such as cereals, oilseeds and oilseed products, meat and biofuels. This year’s edition for the period 2022 to 2031, however, is characterised by the uncertainties caused by the war and its economic implications on the world economy. The report includes a chapter with a short-term assessment of how the war may affect both global agricultural markets and food security because the medium-term impacts cannot be assessed based on the data currently available. The authors summarize what almost everyone has learned from newspaper reports since the outbreak of the war: Ukraine and Russia are among the most important producers and exporters of arable crops in the world, particularly of wheat, barley, maize, sunflower seed and rapeseed. “Based on the average of the last five seasons, Russia and Ukraine accounted for 10% and 3% of global wheat production, respectively. Russia and Ukraine are the first and fifth largest wheat exporters, accounting for 20% and 10% of global exports, respectively,” confirms the report. Both countries played in important role in supplying wheat to global markets, including to the Near East and North Africa region, where wheat is the main staple food. Russia and Ukraine also account for 20% of global barley production, and are the third and fourth largest exporters, respectively. In addition, Ukraine is the world’s largest producer of sunflower seed, followed by Russia. Together, they produce more than 50% of the global output. Moreover, many farmers rely on Russia for fertiliser exports. The World Food Programme (WFP) sourced the majority of the wheat and a large share of other commodities distributed from Ukraine.

The Outlook looks at the global food security impacts of the war by conducting several scenarios with a model that assumes different impacts on the harvest and export levels of all crops in Ukraine, and on the export levels of wheat in Russia for the next marketing season (2022/23). The authors project the impact of these scenarios on international wheat prices. If Ukraine fully loses its capacity to export, this could lead to a 19% increase in the global wheat price. If Ukraine’s export capacity is reduced by 50% and Russia’s exports are 50% of the normal amount, wheat prices would increase by 21%. In the most extreme scenario where Russian exports are reduced by 50% and Ukraine experiences a total loss of its export capacity, wheat prices would be 34% higher than without the war. High food prices are putting millions more people at risk of undernourishment. In a separate analysis, based on the development of international prices, the FAO projected undernourishment to increase by about 1% globally in 2022/23, which means an increase of between 8 and 13 million people in total numbers, depending on the assumed severity of the export reduction. “A scenario simulating a severe export shortfall from Ukraine and Russia in 2022/23 and 2023/24, and assuming no global production response, suggests an increase in the number of undernourished by close to 19 million people in 2023/24. This adds to the recent increase in global undernourishment following the COVID-19 pandemic,” highlights the report. “These rising prices of food, fertilizer, feed and fuel, as well as tightening financial conditions are spreading human suffering across the world,” said FAO Director-General QU Dongyu.

The report also reminds that the global community should not lose sight of the need to work towards achieving the 2030 Agenda and the Sustainable Development Goals (SDGs). The authors focus on the UN’s Sustainable Development Goal 2 (SDG-2) on Zero Hunger as well as the aim to limit global warming to below 2 degrees by 2050 as agreed in the 2015 Paris Agreement and the role agriculture can and must play here. The Outlook projects that, without additional efforts, SDG2 will not be achieved by 2030. Global food consumption is projected to increase by 1.4% p.a. over the next decade, mainly driven by population growth. The projected evolution of diets continues to be largely determined by income levels in the coming decade. In high-income countries, heightened concerns about health and the environment are expected to result in a decline in per capita consumption of sugar and only little growth in the consumption of animal protein. In contrast, consumers in middle-income countries are expected to increase their food consumption and the diversity of their diets, with growing shares of animal products and fats over the next ten years. Diets in low-income countries, however, will remain largely based on staples, and the projections suggest that food consumption will not increase sufficiently to meet SDG 2 on Zero Hunger by 2030. Agricultural emissions will continue to increase. Direct greenhouse gas (GHG) emissions from agriculture are projected to increase by 6% during the next decade, with livestock accounting for 90% of this increase. Agricultural emissions are, nonetheless, projected to grow at a lower rate than production, thanks to yield improvements and a reduction in the share of ruminant production. (ab)

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