The global food crisis, already severe before Russia's invasion of Ukraine, is expected to worsen significantly in 2023, with experts citing multiple contributing factors beyond the war. Food commodity prices have fallen recently due to recession fears, a strong harvest in Russia, and hopes for revived grain trade from Ukraine, but underlying issues persist. The conflict compounded pre-existing problems like droughts in key crop-producing regions and pandemic-related supply chain disruptions, particularly impacting poorer countries already struggling economically.
The war has severely hampered Ukraine's food exports, with volumes down significantly. For example, in June, Ukraine exported nearly 1 million tonnes of wheat, corn, and barley, a 40% decrease from the previous year. Farmers are now struggling with storage for new harvests, which could prevent them from affording seeds and fertilizers for the next season. Soaring energy prices are also affecting nitrogen fertilizer production, a critical crop nutrient. The UN World Food Programme's chief economist, Arif Husain, warned that without addressing agricultural inputs, the crisis of affordability could turn into a crisis of availability next year.
Food insecurity was at record highs even before the war, with almost 770 million people hungry in 2021, the highest number since 2006. The UN Food and Agriculture Organization predicts the conflict will increase the number of undernourished people by up to 13 million this year and another 17 million in 2023. The World Bank estimates that a 1 percentage point rise in food prices pushes an additional 10 million people into extreme poverty. Countries in Africa, the Middle East, and Central Asia, which heavily rely on food imports, are particularly vulnerable, facing currency declines on top of rising food costs. For instance, food inflation is 24% in Egypt and 38% in Ethiopia, where food comprises a large portion of household spending.
While some optimistic reports suggest food price increases in 2023 might be lower than expected due to increased grain production, many Western government officials and analysts anticipate the crisis to last for years. They point to the combined effects of climate change, the pandemic, and other global conflicts. The diversification of import sources by countries previously dependent on Ukraine for grains and vegetable oils is expected to keep prices elevated. Economists warn that consumers may need to adjust to permanently higher food prices due to increased weather volatility and its impact on crop yields, as highlighted by Caroline Bain, chief commodities economist at Capital Economics. The current situation may also lead to a dismantling of the traditional global trade system, with a potential shift towards more regional supply chains.
The Black Sea region remains a critical flashpoint, with stepped-up attacks by Russia and Ukraine on commercial ships and ports threatening grain exports and driving wheat prices to a two-year high, as well as impacting corn and rapeseed. Ukraine's Agriculture Minister Taras Vysotskyi warned that continued disruption could lead to a global price increase of at least 25-30%, similar to the food inflation experienced in 2022. Ukraine, a major grain producer, typically exports over 90% of its agricultural products by sea. In early August, Ukraine exported only 463,000 metric tons of grain, about one-third of its usual pace, risking storage shortages by November. Transporting grain by rail and road costs an additional $50 to $70 per ton.
