Russia’s invasion of Ukraine has accelerated the crisis. Before the war, the two countries accounted for nearly 30% of globally traded wheat. Ukraine provided roughly half the world’s exports of sunflower oil and Russia one-eighth of its fertilizer exports. Sanctions on Russia have further inflated energy prices, making fertilizers even costlier.
The global consequences of a protracted war could be dire. High input costs could dissuade many smaller farmers from planting more, preventing supply from meeting demand and increasing volatility. With the dollar strengthening, many countries will struggle to pay for key imports of food and fuel. Price spikes and shortages could provoke unrest, as they did during the Arab Spring in 2011, while pushing millions into extreme poverty.
Governments are compounding the problem with protectionism. Since the invasion of Ukraine, at least 20 countries have imposed restrictions on food exports, covering around 17% of calories traded globally, including Indonesia’s decision to block crucial palm-oil shipments. Such restrictions risk setting off a cascade effect and driving up prices for everyone: They’re estimated to have accounted for a 13% rise in global food prices during the 2008-11 food crisis.
The pressure on the world’s food supply requires a coordinated response. Foreign ministers gathering at the United Nations next week to discuss food security should pledge not to add new trade restrictions and to lift those already imposed as swiftly as possible. At the June ministerial meeting of the World Trade Organization, countries should seek a more binding agreement, at the very least not to block food shipments needed for humanitarian purposes. They should also share any information they have about stocks and shipping logistics, so markets don’t panic unnecessarily.
Countries should also roll back policies that take food off the market during times of need. The US 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 be shipped on US carriers. It would be cheaper and more effective to fund WFP efforts to buy supplies closer to where they’re needed.
Though rightly focused on helping Ukraine defend itself, Western countries will also need to increase aid to the developing world. Already stretched fiscally from dealing with the pandemic, poor countries need help subsidizing fertilizers, strengthening safety nets and shoring up their macroeconomic positions. In addition to direct aid, the G-20 can follow up on pledges to reallocate $100 billion in so-called special drawing rights from the International Monetary Fund to vulnerable nations, and make it easier for them to seek debt relief.
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 a crisis this complex, the first principle should be to do no harm.
More From 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.
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