food security

Action of G7 on Food Security and Fact Sheet from White House

· June 28, 2022 · food security · · No Comments

In yesterday’s post, I reviewed the threats to populations around the world from food insecurity and the actions being taken by individual countries and groups of countries, including the G7 (Canada, France, Germany, Italy, Japan, the United Kingdom, the United States and the European Union). See June 27, 2022:  The global food insecurity crisis — efforts to reduce the crisis and avoid widespread social unrest, https://currentthoughtsontrade.com/2022/06/27/the-global-food-insecurity-crisis-efforts-to-reduce-the-crisis-and-avoid-widespread-social-unrest/.

Ahead of the release of the G7 Communique at the end of their meeting in Germany on June 28, the White House released a fact sheet entitled “President Biden and G7 Leaders Announce Further Efforts to Counter Putin’s Attack on Food Security”. https://www.whitehouse.gov/briefing-room/statements-releases/2022/06/28/fact-sheet-president-biden-and-g7-leaders-announce-further-efforts-to-counter-putins-attack-on-food-security/. The main takeaway is a commitment by the G7 of an additional $4.5 billion to address food security ($2.76 billion from the United States). The Fact Sheet provides a useful summary of the actions by the United States on the question of food security and is copied below in its entirety. Assistance by countries is both to help short term needs and for longer-term improvements in food security.

“FACT SHEET: President Biden and G7 Leaders Announce Further Efforts to Counter Putin’s Attack on Food Security

“JUNE 28, 2022•STATEMENTS AND RELEASES

“Biden-Harris Administration is Driving a Multi-Pronged Response to Global Food Security Crisis

“President Biden and G7 leaders will announce that they will contribute over $4.5 billion to address global food security, over half of which will come from the United States. President Biden will announce $2.76 billion in additional U.S. Government funding commitments to help protect the world’s most vulnerable populations and mitigate the impacts of Russia’s unprovoked and unjustified war in Ukraine on growing food insecurity and malnutrition. These new investments will support efforts in over 47 countries and regional organizations, to support regional plans to address increasing needs.

“Vladimir Putin’s actions have strangled food and agriculture production and have used food as a weapon of war, including through the destruction of agricultural storage, processing, and testing facilities; theft of grain and farm equipment; and the effective blockade of Black Sea ports Russia’s choice to attack food supplies and production have an impact on markets, storage, production, and ultimately negatively impact consumers around the globe. Putin’s aggression in Ukraine, combined with the impacts from COVID-19, increasing conflict, high prices for fuel and fertilizer, have combined to devastate already fragile global food security and nutrition. Millions of people living far from the conflict face an increased risk of poverty, hunger, and malnutrition as a result of Putin’s war. Estimates suggest that up to 40 million more people could be pushed into poverty in 2022 as a result of Putin’s war in Ukraine and its secondary effects.

“While the entire globe will continue to be affected by Russia’s actions, the most immediate needs will present in the Horn of Africa, the most immediate humanitarian assistance related to food security crisis is in the Horn of Africa, as it experiences a record-setting fourth straight season of drought, that may lead to famine. As many as 20 million people may face the threat of starvation by the end of the year. The prolonged drought is also having dire nutrition impacts, putting children at severe risk of malnutrition and in need of treatment.

“To address and mitigate further impacts on global food security, the U.S. Government will continuing life-saving food assistance to address these growing needs and leverage additional financial commitments. Of the newly announced commitment of an additional $2.76 billion in humanitarian and economic assistance appropriated in May, $2 billion will be to help save lives through emergency interventions and $760 million will be for sustainable near-term food assistance to help mitigate further increases in poverty, hunger, and malnutrition in vulnerable countries impacted by high prices of food, fertilizer, and fuel.  

“The U.S. government’s multi-pronged response to combat global food insecurity includes:

“Global Humanitarian Assistance

“Since the start of Russia’s full-scale invasion of Ukraine in February, the United States has provided $2.8 billion to scale up emergency food operations in countries impacted by the food security crisis. In addition to this funding, the U.S. Agency for International Development (USAID) is committing another $2 billion in international disaster assistance (IDA) funds for emergency humanitarian needs over the next three months. These funds include direct food assistance, as well as related health, nutrition, protection, and water, sanitation and hygiene services, in countries with high levels of acute food insecurity, reliance on Russian or Ukrainian imports, and vulnerability to price shocks, and will support countries hosting refugee populations.

“Global Development Assistance

“As we continue to address acute humanitarian needs, the U.S. government will continue to strengthen food systems and mitigate medium-term impacts on food security. The U.S. Government is investing $760 million to combat the effects of high food, fuel, and fertilizer prices – now being driven up by Putin’s war – in those countries that need it most.

“o The United States, through USAID, will program $640 million to support bilateral targeted agriculture and food security programs to strengthen agricultural capacity and resilience in more than 40 of the most vulnerable countries ­– Ukraine, as well as across 24 countries and regions in Africa, 10 countries in Asia, 6 countries and regional presence in Latin American and the Caribbean, and 6 countries in the Middle East. These investments will tackle urgent global fertilizer shortages, purchase resilient seeds, mitigate price shortages for fertilizer, scale-up social safety nets for families suffering from hunger and malnutrition, and avert food and humanitarian crises in the most vulnerable countries.  These solutions will be tailored to mitigate specific needs within specific contexts, driven by local solutions that can be scaled for maximum impact.

“o The United States will also undertake multilateral efforts to protect livelihoods and nutrition and help vulnerable countries build their resilience to shocks, including food price volatility, supply chain issues, climate impacts, and other stresses beyond the immediate term. Specifically, in working with Congress, the United States will provide $120 million to the following efforts:   

“o Support for the African Development Bank’s (AfDB) African Emergency Food Production Facility (AEFPF) to increase the production of climate-adapted wheat, corn, rice, and soybeans over the next four growing seasons in Africa.

“o Support for the International Fund for Agricultural Development’s (IFAD) Crisis Response Initiative (CRI) to help protect livelihoods and build resilience in rural communities.

“o Support for the Africa Adaptation Initiative (AAI) to develop a pipeline of bankable projects in Africa, to leverage private equity.

“o Support for the Africa Risk Capacity (ARC) Africa Disaster Risk Financing Programme (ADRiFi) to help African governments to respond to food system shocks by increasing access to risk insurance products.

“o A fertilizer efficiency and innovation program to enhance the efficiency of fertilizer use in countries where fertilizer tends to be overapplied.

“o Support for the UN Food and Agriculture Organization (FAO) will fund soil mapping spanning multiple countries to provide information allowing for wiser water usage, greater fertilizer conservation, and improved climate resilience impacts.

“Expansion of Feed the Future

‘Feed the Future (FTF), the U.S. government’s flagship global food security initiative led by USAID, is expanding its global footprint in eight new target countries from 12 to 20 target countries, in Africa that were also most vulnerable to the impacts of Russia’s war in Ukraine. The new target countries are the Democratic Republic of the Congo, Liberia, Madagascar, Malawi, Mozambique, Rwanda, Tanzania, and Zambia. This expansion of Feed the Future countries delivers on President Biden’s $5 billion commitment in September 2021 to end global hunger, malnutrition and build sustainable, resilient food systems abroad.

“The U.S. government currently invests $2 billion per year through Feed the Future, which builds on existing technical expertise, programs and partners in more than 35 countries. In these countries, the U.S. government investments pave the way for further investments from the private sector, donors and local governments.

“Global Agriculture and Food Security Program (GAFSP)

“The United States through the U.S. Treasury, continues to exercise leadership in the Global Agriculture and Food Security Program (GAFSP) – a $2 billion multilateral financing mechanism that has helped the world’s poorest countries increase investments in agriculture and food security. The United States is contributing $155 million to support projects that raise agricultural productivity, link farmers to markets, improve livelihoods, reduce vulnerability, and enhance resilience to shocks. The United States is also newly serving as Co-Chair of the GAFSP Steering Committee. In this leadership position, the United States will help deepen and accelerate GAFSP’s response to the food security crisis.

“USG Leadership in Driving Global Action

“From the beginning, the United States has been at the forefront of global efforts to confront this crisis.

“o The Department of the Treasury is also providing $500 million to the European Bank for Reconstruction and Development (EBRD), which will help support the EBRD’s Resilience and Livelihood Framework.  This package of investments, expected to reach €2 billion over the next two years, will support businesses and public services across all sectors affected by the war in Ukraine and neighboring countries.  The funding will support Ukraine’s energy and food security needs; investing in improvements in municipal infrastructure to provide energy, water and wastewater services, and other needs, and supporting internally displaced persons.  The United States contribution is helping to mobilize an additional $500 million in support from other donors.   

“o In April, the Biden-Harris Administration announced that the U.S. Department of Agriculture (USDA) and USAID took the extraordinary step to draw down the full balance of the Bill Emerson Humanitarian Trust (BEHT) as part of an effort to provide $670 million in food assistance to countries in need as a result of Putin’s unprovoked further invasion of Ukraine. USDA will provide $388 million in additional funding through the Commodity Credit Corporation (CCC) to cover ocean freight transportation, inland transport, internal transport, shipping and handling, and other associated costs. USAID will use the BEHT’s $282 million to procure U.S. food commodities to bolster existing emergency food operations in six countries facing severe food insecurity: Ethiopia, Kenya, Somalia, Sudan, South Sudan, and Yemen.

“o In May, the United States chaired a Global Food Security Call to Action Ministerial and launched the Roadmap for Global Food Security – endorsed by 94 countries – which affirms a commitment to act with urgency, at scale, and in concert to respond to the urgent food security and nutrition needs of millions of people in vulnerable situations around the world. Ninety-four countries have endorsed the Roadmap and committed to provide immediate humanitarian assistance, build resilience of those in vulnerable situations, support social protection and safety nets, and strengthen sustainable, resilient, and inclusive food systems in line with the objectives of the United Nations 2030 Agenda for Sustainable Development and its Sustainable Development Goals, and the objectives of the 2021 UN Food Systems Summit. The United States also convened the UN Security Council during its May presidency to underscore the intersection of food insecurity and conflict, particularly in the context of Russia’s war in Ukraine, and to urge the international community to action.

“o In June, the United States, in coordination with partners, raised awareness of growing food insecurity at the World Trade Organization (WTO) 12th Ministerial Conference. Key outcomes included: a Ministerial Declaration on the Emergency Response to Food Insecurity, in which WTO Members committed to take concrete steps to facilitate trade and improve the functioning and long-term resilience of global markets for food and agriculture; and a Ministerial Decision in which Members agreed to exempt World Food Programme food purchases from export restrictions and prohibitions.”

The global food insecurity crisis — efforts to reduce the crisis and avoid widespread social unrest

· June 27, 2022 · food security, Sanctions on Russia following its invasion of Ukraine · No Comments

In prior posts, I have reviewed the challenges globally on food security flowing from Russia’s invasion of Ukraine. These challenges compound the difficulties flowing from climate change problems of extended draughts in various parts of the world and the challenges for countries trying to rebound from the COVID-19 pandemic. See, e.g., May 24, 2022:  How severe is the food security challenge?, https://currentthoughtsontrade.com/2022/05/24/how-severe-is-the-food-security-challenge/; May 16, 2022:  Wheat prices spike following Indian export ban, https://currentthoughtsontrade.com/2022/05/16/wheat-prices-spike-following-indian-export-ban/; May 15, 2022:  India bans exports of wheat, complicating efforts to address global food security problems posed by Russia’s war in Ukraine, https://currentthoughtsontrade.com/2022/05/15/india-bans-exports-of-wheat-complicating-efforts-to-address-global-food-security-problems-posed-by-russias-war-in-ukraine/; April 19, 2022:  Recent estimates of global effects from Russian invasion of Ukraine, https://currentthoughtsontrade.com/2022/04/19/recent-estimates-of-global-effects-from-russian-invasion-of-ukraine/; March 30, 2022:  Food security challenges posed by the Russian invasion of Ukraine, https://currentthoughtsontrade.com/2022/03/30/food-security-challenges-posed-by-the-russian-invasion-of-ukraine/.

In prior periods of agricultural shortages and inflationary prices for agricultural goods, there has been significant social unrest particularly in countries where food accounts for a large part of disposable income for people. See Financial Times, ‘People are hungry’: food crisis starts to bite across Africa, June 23, 2022, https://www.ft.com/content/c3336e46-b852-4f10-9716-e0f9645767c4 (“During the 2007-2008 food crisis, which was caused by a spike in energy prices and droughts in crop-producing regions, about 40 countries faced social unrest: More than a third of those countries were on the African continent.”); see also Terence P. Stewart, The Food Crisis: A Survey of Sources and Proposals for Preventing a Global Catastrophe, 2008 (copied in March 30, 2022:  Food security challenges posed by the Russian invasion of Ukraine, https://currentthoughtsontrade.com/2022/03/30/food-security-challenges-posed-by-the-russian-invasion-of-ukraine/)(excerpt from the summary copied below).

A recent paper from the UN Food and Agriculture Organization and the World Food Programme identifies countries in danger of starvation or acute hunger in the June – September 2022 time period. FAO, WFP, Hunger Hotspots, FAO-WFP early warnings on acute food insecurity, June to September 2022 Outlook, https://docs.wfp.org/api/documents/WFP-0000139904/download/?_ga=2.27484728.588580763.1656342884-1119086152.1656342884. The Executive Summary (page 5 of the report) is copied below.

“The Food and Agriculture Organization of the United Nations (FAO) and the World Food Programme (WFP) warn that acute food insecurity is likely to deteriorate further in 20 countries or situations
(including two regional clusters) – called hunger hotspots – during the outlook period from June to September 2022.

“Acute food insecurity globally continues to escalate. The recently published 2022 Global Report on Food Crises alerts that 193 million people were facing Crisis or worse (Integrated Food Security Phase Classification [IPC]/Cadre Harmonisé [CH] Phase 3 or above) across 53 countries or territories in 2021. This increase must be interpreted with care, given that it can be attributed to both a worsening acute food insecurity situation and a substantial (22 percent) expansion in the population analysed between 2020 and 2021. In addition, an all-time high of up to 49 million people in 46 countries could now be at risk of falling into famine or famine-like conditions, unless they receive immediate life and livelihoods-saving
assistance. This includes 750 000 people already in Catastrophe (IPC/CH Phase 5).

“Ethiopia, Nigeria, South Sudan and Yemen remain at the highest alert level as in the previous edition of this report. In the current report, Afghanistan and Somalia have been added to the list. These countries all have some populations identified or projected to experience starvation or death (Catastrophe, IPC Phase 5) or at risk of deterioration towards catastrophic conditions, and require the most urgent attention.

“In Afghanistan, for the first time since the introduction of IPC in the country in 2011. Catastrophic conditions (IPC Phase 5) are present for 20 000 people in Ghor due to limited humanitarian access during
the March to May period. In the outlook period, acute food insecurity is projected to increase by 60 percent year-on-year.

“After projecting 401 000 people facing Catastrophic conditions (IPC Phase 5) in Tigray, Ethiopia, in 2021, only 10 percent of required assistance arrived in the region until March 2022, and local agricultural production – which was 40 percent of the average – was critical for food security and livelihoods. A recent ‘humanitarian truce’ remains fragile but has allowed for some convoys to reach the region. The Famine Review Committee’s 2021 scenarios of a Risk of Famine for Tigray might remain relevant, unless humanitarian access stabilizes.

“Although no populations were projected to be in Catastrophe (CH Phase 5) in Nigeria in the outlook period, the record-high levels of acute food insecurity are of serious concern. Importantly, the population in Emergency (CH Phase 4) is expected to reach close to 1.2 million people during the peak of the lean season from June to August 2022, including in Adamawa, Borno and Yobe where some local government areas continue to be inaccessible or hard to reach.

‘In Somalia, a Risk of Famine has been identified through June 2022, under a scenario where rains are significantly below average, food prices increase further, conflict and displacement increase and humanitarian assistance remains insufficient – 81 000 people will face Catastrophe (IPC Phase 5) between April and June.

“In South Sudan, a Famine Likely situation, which was present in some areas in 2021, was averted by improved coordination of humanitarian assistance, and hence the projected number of people in Catastrophe (IPC Phase 5) was reduced slightly, to 87 000 between April and July. That said, the situation remains of highest concern.

“In Yemen, the food security situation deteriorated significantly compared to last year, including a strong increase in the number of people in Catastrophe (IPC Phase 5), which are projected to reach 161 000 over the outlook period. There is also a Risk of Famine projected for some areas.

“The Democratic Republic of the Congo, Haiti, the Sahel region, the Sudan and the Syrian Arab Republic remain countries of very high concern, as in the previous edition of this report. In this edition, Kenya is added to the list. This is due to the high number of people in critical food insecurity coupled with worsening drivers expected to further intensify life-threatening conditions. Sri Lanka, West African coastal countries (Benin, Cabo Verde and Guinea), Ukraine and Zimbabwe have been added in the list of hotspot countries compared to the January 2022 edition of this report. Angola, Lebanon, Madagascar and Mozambique remain hunger hotspots.

“Organized violence and conflict remain the primary drivers for acute hunger, with key trends indicating that conflict levels and violence against civilians continued to increase in 2022. Moreover, weather
extremes such as tropical storms, flooding and drought remain critical drivers in some regions.

“Ripple effects of the war in Ukraine have been reverberating globally against the backdrop of a gradual and uneven economic recovery from the COVID-19 pandemic, steadily increasing food and energy prices, and deteriorating macroeconomic conditions. Disruptions to the Ukrainian agricultural sector and constrained exports reduce global food supply, further increase global food prices, and finally push up already high levels of domestic food price inflation. Additionally, high fertilizer costs are likely to affect yields and therefore the future availability of food. Adding to the economic instability, civil unrest could emerge in some of the most affected countries in the upcoming months. Finally, humanitarian organizations are seeing sharp cost increases for their operations and reduced global attention risking to translate into increasing funding shortages. (emphasis added)

“Targeted humanitarian action is urgently needed to save lives and livelihoods in the 20 hunger hotspots. Moreover, in six of these hotspots – Afghanistan, Ethiopia, Nigeria, Somalia, South Sudan and Yemen – humanitarian actions are critical to preventing starvation and death. This report provides country-specific recommendations on priorities for emergency response as well as anticipatory action to address existing humanitarian needs and ensure short-term protective interventions before new needs materialize.”

The report at page 12 provides a chart showing the number of people in acute food insecurity in hotspot countries. The page is copied below.

The Financial Times article referenced earlier notes that there have already been signs of social unrest in a number of countries — Chad, Uganda, and Kenya. See Financial Times, ‘People are hungry’: food crisis starts to bite across Africa, June 23, 2022, https://www.ft.com/content/c3336e46-b852-4f10-9716-e0f9645767c4. Similarly, the Economist has flagged social unrest from rising food and energy prices in two recent articles. See The Economist, Costly food and energy are fostering global unrest, June 23, 2022, https://www.economist.com/international/2022/06/23/costly-food-and-energy-are-fostering-global-unrest (“All around the world, inflation is crushing living standards, stoking fury and fostering turmoil. Vladimir Putin’s invasion of Ukraine has sent prices of food and fuel soaring. Many governments would like to cushion the blow. But, having borrowed heavily during the pandemic and with interest rates rising, many are unable to do so. All this is aggravating pre-existing tensions in many countries and making unrest more likely, says Steve Killelea of the Institute for Economics and Peace (iep), an Australian think-tank.”); The Economist, A wave of unrest is coming. Here’s how to avert some of it, June 23, 2022, https://www.economist.com/leaders/2022/06/23/a-wave-of-unrest-is-coming-heres-how-to-avert-some-of-it (“Jesus said that man does not live by bread alone. Nonetheless, its scarcity makes people furious. The last time the world suffered a food-price shock like today’s, it helped set off the Arab spring, a wave of uprisings that ousted four presidents and led to horrific civil wars in Syria and Libya. Unfortunately, Vladimir Putin’s invasion of Ukraine has upended the markets for grain and energy once again. And so unrest is inevitable this year, too.”). The Economist, in the first referenced article, forecasts the likelihood of increase in serious outbreaks of unrest over the next twelve months. Much of Africa, various countries in Asia and the Middle East and parts of Central and South America show increases from 25% to 100% over the prior 12 months. The article also reviews challenges in Turkey, Pakistan, Sri Lanka, Kazakhstan, Kyrgyzstan, Tunisia, Peru, Uganda, Turkmenistan and South Africa.

Major countries and multilateral organizations have been taking actions to try to address some of the challenges presented from the price inflation on food, fertilizer and energy. Some countries that are able are providing assistance to their people with tax reductions or monetary grants. See, e.g., Reuters, Malaysia plans record $18 billion subsidy spend in inflation fight, June 25, 2022, https://www.reuters.com/markets/asia/malaysia-plans-record-18-bln-subsidy-spend-inflation-fight-2022-06-25/ (“Malaysia is projected to spend 51 billion ringgit on consumer subsidies including for fuel, electricity, and food, assuming that commodity market prices remain at current levels, Finance Minister Tengku Zafrul Aziz said in a statement. The government will also distribute 11.7 billion ringgit in cash aid, and 14.6 billion ringgit in other subsidies, he said.”). Other countries provide economic assistance to those in need in other countries. See, e.g., European Commission, Food security: EU to step up its support to African, Caribbean and Pacific countries in response to Russia’s invasion of Ukraine, June 23, 2022, https://ec.europa.eu/commission/presscorner/detail/en/IP_22_3889

Prices for wheat and sunflower oil have spiked since the war as Ukraine’s large volumes that are normally exported have been trapped in Ukraine by Russia’s blockade of Black Sea ports, destruction of grain and sunflower seed silos by Russian missiles, by the theft of Ukrainian product by the Russians and limitations on Ukrainian farmers being able to work their land during the war. See, e.g., NPR, Russia has blocked 20 million tons of grain from being exported from Ukraine, June 3, 2022, https://www.npr.org/2022/06/03/1102990029/russia-has-blocked-20-million-tons-of-grain-from-being-exported-from-ukraine; Center for Strategic & International Studies, Spotlight on Damage to Ukraine’s Agricultural Infrastructure since Russia’s Invasion, June 15, 2022, https://www.csis.org/analysis/spotlight-damage-ukraines-agricultural-infrastructure-russias-invasion (“Russia is taking advantage of the transportation bottlenecks caused by port blockades to target Ukraine’s food storage facilities. According to Ukraine’s ministry of defense, Russian forces have attacked grain silos across the country and stolen an estimated 400,000-500,000 metric tons of grain from occupied regions to increase Russian competitive advantage in the export market.”).

Efforts have been being made by the UN, by Turkey and others to get Russia to stop its blockade of Ukrainian ports to permit the export of grain and other agriculture products. See, e.g., Reuters, Russia, Turkey to pursue talks on Ukraine grain exports, June 23, 2022, https://www.reuters.com/world/russia-turkey-agree-more-consultations-grain-exports-ukraine-2022-06-22/ (“Ukraine is one of the top global wheat suppliers, but shipments have been halted by Russia’s invasion, causing global food shortages. The United Nations has appealed to both sides, as well as maritime neighbour Turkey, to agree to a corridor.”).

At the same time, the European Union and United States have been working to help Ukraine export wheat and other agricultural products by alternative routes, though the volume that can be so moved is only a small percentage of what Ukraine normally exports. See, e.g., European Commission, Commission to establish Solidarity Lanes to help Ukraine export agricultural goods, 12 May 2022, https://ec.europa.eu/commission/presscorner/detail/en/ip_22_3002; Politico, Biden races against time to unlock Ukraine’s trapped grain, June 17, 2022, https://www.politico.com/news/2022/06/17/biden-ukraine-trapped-grain-00040640.

Multilateral organizations like the World Bank, IMF and World Trade Organization have been offering assistance within their zones of competence. For example, the World Bank has a variety of programs that have been started or utilized to help with the growing food insecurity. See World Bank, Food Security Update | Rising Food Insecurity in 2022, June 23, 2022, https://www.worldbank.org/en/topic/agriculture/brief/food-security-update# (lists 14 projects including “The $2.3 billion Food Systems Resilience Program for Eastern and Southern Africa, approved on June 21, 2022, helps countries in Eastern and Southern Africa increase the resilience of the region’s food systems and ability to tackle growing food insecurity.”). The World Bank’s update on food insecurity is embedded below.

Food-security-update

The WTO during the 12th Ministerial Conference which concluded on June 17, 2022 did address food security concerns both by agreeing not to block exports to the World Food Programme and by agreeing to transparency on actions taken and efforts to minimize use of export restraints on agricultural products. See June 17, 2022:  WTO’s 12th Ministerial Conference — some successes after a difficult five plus days, https://currentthoughtsontrade.com/2022/06/17/wtos-12th-ministerial-conference-some-successes-after-a-difficult-five-plus-days/.

In addition, the U.S., European Union and other allies coordinating actions to help Ukraine and hold Russia accountable, have been working to address access to food products, energy products and to increase availability of fertilizers. These actions have been announced by major players unilaterally as well as through various groupings, including the current G-7 meeting in Germany, U.S.-chaired Global Food Security Ministerial Meeting,  and the recently concluded Summit of the Americas Agriculture Producers Declaration. See, e.g., The White House, Summit of the Americas Agriculture Producers Declaration, June 13, 2022, https://www.whitehouse.gov/briefing-room/statements-releases/2022/06/13/summit-of-americas-agriculture-producers-declaration/; U.S. Department of State, Chair’s Statement for Global Food Security — call to Action, June 24, 2022, https://www.state.gov/chairs-statement-roadmap-for-global-food-security-call-to-action-2/; European Commission, Commission acts for global food security and for supporting EU farmers and consumers, 23 March 2022, https://ec.europa.eu/commission/presscorner/detail/en/ip_22_1963; U.S. Department of State, Secretary Antony J. Blinken During the Uniting for Global Food Security Conference, June 24, 2022, https://www.state.gov/secretary-antony-j-blinken-during-the-uniting-for-global-food-security-conference/. These four documents are embedded below.

Summit-of-the-Americas-Agriculture-Producers-Declaration-_-The-White-House

Chairs-Statement_-Roadmap-for-Global-Food-Security-–-Call-to-Action-United-States-Department-of-State

Commission_acts_for_global_food_security_and_for_supporting_EU_farmers_and_consumers

Secretary-Antony-J.-Blinken-During-the-Uniting-for-Global-Food-Security-Conference-United-States-Department-of-State

A few thoughts

The major efforts underway by various countries to reduce the global effect of the Russian war on food security are extensive and will have positive effects, some immediately, others over time (e.g., increasing production of fertilizers or improving efficiencies of fertilizers). However, for the poorest countries and those reliant on food imports from Ukraine and Russia, the internal pressures will continue to mount as limited financial resources and high food and energy prices push more and more people into food insecurity situations of increased severity. Social unrest in a number of countries is likely.

While Russia has exacerbated the food insecurity by its actions on Ukraine’s agricultural products and by other actions restricting its own exports (when sanctions do not cover agricultural goods or fertilizers) and has the ability to end the challenges it has created, it seems highly unlikely that any serious progress will be made in getting Ukrainian agricultural goods out through Black Sea ports while hostilities continue. EU and U.S. efforts are helping some but are not perceived to be a viable short-term solution to moving Ukrainian goods to export markets at affordable prices.

Some short-term steps the private sector can take to help alleviate the damage to at-risk countries is to increase funding to the World Food Programme (its June report cited earlier is this post reflect that with higher prices and challenges in getting funding, the WFP is being forced to reduce assistance in various countries). While most funding for WFP comes from governments, the private sector can contribute and should actively participate. Obviously, there is need for more funding by governments as well, but the multiple crises at least make it questionable how much more governments will do in fact in 2022.

Moreover, with the large number of low and middle-income countries facing potential debt crises, there is a need for at least selective debt relief where the challenges faced flow simply from the rapid increase in inflation.

None of the proposals for action by those looking to lessen the pressures on global markets has involved increasing the percent of the world’s grain that goes to human consumption during the current crisis. See The Economist, Most of the world’s grain is not eaten by humans, June 23, 2022, https://www.economist.com/graphic-detail/2022/06/23/most-of-the-worlds-grain-is-not-eaten-by-humans. Presumably the challenges flow from the large percentage of grains that are fed to animals and the reduction in the world’s pasturelands which make alternative feeding of livestock less likely to increase in the short term. A small percentage (10%) of grains goes to biofuels and would be unlikely to be shifted in the short term as the use of grains in biofuels reduces the volume of petroleum products otherwise needed.

In challenging times, it is important for key countries to step forward and show leadership. There has been extensive leadership shown by the U.S., the EU and many of the other countries involved in supporting Ukraine and holding Russia to account for its unprovoked war with Ukraine. Continued coordination and adoption of bold actions by those currently engaged and an expanded group of willing participants will be needed to reduced the damage to low- and middle-income countries and limit the amount of social unrest that will yet unfold in 2022 and 2023.

The WTO’s 12th Ministerial Conference starts in three days – will modest results yet be possible?

· June 9, 2022 · 12th Ministerial Conference, Fisheries Subsidies negotiations, food security, Waiver of TRIPS Obligations · · No Comments

Looking at WTO press releases over the last week, the WTO’s Director-General has been urging Members to find a path forward on a handful of issues — a response to the pandemic (including IP flexibilities), concluding the fisheries subsidies negotiations that have been dragging on for more than twenty years, obtaining some movement on agriculture (food security, no restrictions on sales to the World Food Programme) and an outline of a possible work program going forward including on WTO reform. Various press articles have suggested modest progress at best has been achieved in recent weeks and flag challenges to achieving any meaningful results at next week’s Ministerial Conference. See, e.g., Inside U.S. Trade’s World Trade Online, MC12: A preview, As ministers head to Geneva for MC12, success remains on a knife’s edge, June 9, 2022, https://insidetrade.com/daily-news/ministers-head-geneva-mc12-success-remains-knife’s-edge. The ongoing Russian war in Ukraine has created even further challenges to achieving any meaningful outcomes next week.

Yesterday’s article in The Globe and Mail had Director-General Ngozi Okonjo-Iweala talking about it still being possible to bring in the first two issues listed above without commenting on other items before the Members. See The Globe and Mail, Global agreement on COVID-19 vaccine rights waiver within reach, WTO chief says, June 8, 2022, https://www.theglobeandmail.com/world/article-global-agreement-on-covid-19-vaccine-rights-waiver-within-reach-WTO/ (“An international agreement on waiving intellectual property rights for COVID-19 vaccines is within reach ahead of a global trade meeting next week, the head of the World Trade Organization said on Wednesday. In a telephone interview, Director-General Ngozi Okonjo-Iweala also said an agreement could be reached on fishing subsidies in time for the meeting, when 120 trade ministers from around the world gather at the body’s Geneva headquarters.”).

As reviewed in prior posts, there are a range of matters that have been discussed including a number of joint statement initiatives (at least one of which is concluded among willing Members). See May 11, 2022:  Less than five weeks to the WTO’s 12th Ministerial Conference — what are likely deliverables?, https://currentthoughtsontrade.com/2022/05/11/less-than-five-weeks-to-the-wtos-12th-ministerial-conference-what-are-likely-deliverables/. How many of the issues that have been being worked on will result in actual outcomes or simply be included in a future work program is the question heading into next week. Most bets would say the Ministerial Conference will be lucky to achieve even modest success.

There are a host of documents that are posted on the WTO webcite as documents for the Ministerial. See WTO, MINISTERIAL CONFERENCES: TWELFTH WTO MINISTERIAL CONFERENCE, https://www.wto.org/english/thewto_e/minist_e/mc12_e/documents_e.htm (accessed on June 9, 2022). There is a draft text and revision for fisheries subsidies (but not the current iteration). There is no draft text for the pandemic response as yet although both the IP flexibility draft forwarded to the membership in recent weeks and the broader package of provisions have been in the public domain, but don’t reflect recent negotiations. The agricultural negotiating group chair’s draft of a text from November 2021 is on the webcite but again doesn’t reflect developments from 2022. There are lists of issues various developing country groups and least developed countries would like to see as well as a Brazilian paper proposing having ministerial meetings every year versus the current every two years (which has twice slipped to only once in four years). While all these documents provide some background on issues of interest to at least some of the Members, the core documents will likely be those added by Sunday reflecting hoped for outcomes.

The world needs the WTO to be successful next week. Fisheries subsidies are a major problem and fish stocks globally have paid the price of the inaction by WTO Members. The pandemic has raised important issues for trade playing a more important role in minimizing negative effects and improving equitable access to vaccines. And the food insecurity issues which have been grossly worsened by the ongoing Russian war in Ukraine are critical for tens of millions of the world’s population, with trade being an important element to addressing the current issue. And the WTO is in need of fundamental reform if it is to be able to address changing global needs in a timely manner, something it has been unable to do in its first twenty 27 years.

The divisions among WTO Members on the path forward for the WTO and the opposition of many to working with the Russian Federation argue for a minimalist package in fact at next week’s Ministerial Conference. Even a minimalist package may prove illusive in today’s world. Let’s hope for a meaningful success next week.

European Council May 30-31, 2022 Meeting — finally EU sanctions on most Russian oil; food security from Russian invasion of Ukraine remains problematic

· May 31, 2022 · food security, Sanctions on Russia following its invasion of Ukraine · · No Comments

In a two day European Council meeting this week, the Council addressed a wide range of issues including finally approving significant sanctions on Russian oil and continuing to focus on what can be done to reduce the food insecurity caused by Russia’s invasion of Ukraine. The conclusions from the two day meeting can be found at European Council, Special meeting of the European Council (30 and 31 May 2022), Conclusions, https://www.consilium.europa.eu/media/56562/2022-05-30-31-euco-conclusions.pdf. The conclusions are eleven pages in length and cover a range of topics. The document is embedded below and the section on sanctions (page 2) and food security are copied below.

2022-05-30-31-euco-conclusions

“Sanctions

“4. The European Council is committed to intensify pressure on Russia and Belarus to thwart Russia’s war against Ukraine. The European Council calls on all countries to align with EU sanctions. Any attempts to circumvent sanctions or to aid Russia by other means must be stopped.

“5. The European Council agrees that the sixth package of sanctions against Russia will cover crude oil, as well as petroleum products, delivered from Russia into Member States, with a temporary exception for crude oil delivered by pipeline.

“6. The European Council therefore urges the Council to finalise and adopt it without delay, ensuring a well-functioning EU Single Market, fair competition, solidarity among Member States and a level playing field also with regard to the phasing out of our dependency on Russian fossil fuels. In case of sudden interruptions of supply, emergency measures will be introduced to ensure security of supply. In this respect, the Commission will monitor and report regularly to the Council on the implementation of
these measures to ensure a level playing field in the EU Single Market and security of supply.

“7. The European Council will revert to the issue of the temporary exception for crude oil delivered by pipeline as soon as possible.”

“II. FOOD SECURITY

“19. The European Council strongly condemns the destruction and illegal appropriation by Russia of agricultural production in Ukraine. The Russian war of aggression against Ukraine is having a direct impact on global food security and affordability. The European Council calls on Russia to end its attacks on transport infrastructure in Ukraine, to lift the blockade of Ukrainian Black Sea ports and to allow food exports, in particular from Odesa. The European Union is taking active measures to facilitate Ukraine’s agricultural exports and to support Ukraine’s agricultural sector in view of the 2022 season. In this regard, the European Council invites Member States to accelerate work on “Solidarity Lanes” put forward by the Commission, and to facilitate food exports from Ukraine via different land routes and EU ports.

“20. The European Council calls for effective international coordination to ensure a comprehensive global food security response. In this respect, it welcomes the Food and Agriculture Resilience Mission (FARM) – based on the three pillars: trade, solidarity and production – which aims to mitigate consequences for price levels, production and access to and supply of grain. It also supports the UN Global Crisis Response Group, the upcoming G7 initiative establishing a Global Alliance for Food Security (GAFS) and other EU and multilateral actions and initiatives. It reiterates its commitment to keep global trade in food commodities free of unjustified trade barriers, enhance solidarity towards the most vulnerable countries and increase local sustainable food production so as to reduce structural dependencies. The European Council invites the Commission to explore the possibility of mobilising reserves from the European Development Fund to support the most affected partner countries. The European Union welcomes the commitment and support of its partners and of international organisations.

“21. The European Council underlines the importance of the Common Agriculture Policy (CAP) in the EU’s contribution to food security and calls for the swift adoption of the CAP Strategic Plans.

“22. In view of the ongoing fertiliser shortages in the global market, the European Council calls for more concerted efforts to work with international partners to promote a more efficient use of and alternatives to fertilisers.”

It has been clear since the beginning of Russia’s war with Ukraine that the most challenging sanctions for the EU would be on banning Russian oil and gas. The EU has put in place sanctions on Russian coal and will be adding oil on a transitional basis by the end of the year for some 90% of oil imports from Russia with a carve out for oil delivered by pipeline — a carve out needed to address Hungary’s concerns and that of several other Central European countries.

Moreover, on May 31st, the EU and the U.K. agreed to ban insuring ships carrying Russian oil which will likely significantly affect Russia’s ability to export crude oil by ship. See Financial Times, UK and EU hit Russian oil cargoes with insurance ban, May 31, 2022, https://www.ft.com/content/10372dd3-be3c-42b9-982b-241a38efcc88.

The insurance ban is one of several other sanctions that the EU is including in its sixth package. See European Commission statement, Opening remarks by President von der Leyen at the joint press conference with President Michel following the special meeting of the European Council of 30 May 2022
Brussels, 31 May 2022, https://ec.europa.eu/commission/presscorner/detail/en/statement_22_3382 (“Indeed, we had a very good discussion tonight. And I am very glad that the Leaders were able to agree in principle on the sixth sanctions package. This is very important. Thanks to this, the Council should now be able to finalise a ban on almost 90% of all Russian oil imports by the end of the year. This is an important step forward. We will soon return to the issue of the remaining 10% of pipeline oil. I want to note that other elements in the package are also important. It is the de-SWIFTing of the Sberbank. The Sberbank is the biggest Russian bank, with 37% of the Russian banking sector. So this is good that we now de-SWIFT the Sberbank. There is a ban on insurance and reinsurance of Russian ships by EU companies; a ban on providing Russian companies with a whole range of business services. And, very important, there is the suspension of broadcasting in the European Union of three further Russian state outlets that were very typically spreading broadly the misinformation that we have witnessed over the last weeks and months.”).

The actions by the EU and the UK are resulting in higher oil prices at least for the present. Russia is also expanding the countries it is choosing not to supply gasl to. See Financial Times, Dutch and Danish set to be cut off by Russia over gas payment dispute, May 30, 2022, https://www.ft.com/content/6715e4e9-d315-4594-8d57-80ce88613685; CNBC, Oil prices jump after EU leaders agree to ban most Russian crude imports, May 30, 2022, https://www.cnbc.com/2022/05/31/oil-prices-eu-russian-crude.html

So there is little question but that the sanctions imposed by the U.S., EU, UK, Canada, Japan, Australia and others are being ratcheted up and will present increased challenges for Russia and continued pain at the pump for many global consumers and businesses.

By contrast, the efforts of the EU and others to address the growing food crisis caused by the disruption of Ukrainian agricultural exports, while continuing and being supported by multilateral organizations, seem unlikely to result in significant movement of Ukrainian wheat and other products in the coming months. The EU has been working hard to develop alternative export routes for Ukrainian goods as is reflected in the European Council’s conclusions from the May 30-31 meeting. See also Financial Times, EU steps up effort to bring millions of tonnes of grain out of Ukraine, May 30, 2022, https://www.ft.com/content/0e0f6cd9-03f0-4150-b330-62032f9a86ad.

However, a recent Politico article reviews the serious challenges to being able to make a significant dent in the exports of Ukrainian agricultural products with the Black Sea effectively closed. See Politico, Only black Sea ships will allow Ukraine to feed the world again, The EU plan to export grain by road and rail will barely move a fifth of regular food supplies, May 31, 2022, https://www.politico.com/news/2022/05/31/only-black-sea-ships-will-allow-ukraine-to-feed-the-world-again-00035970#:~:text=The%20EU%20plan%20to%20export,fifth%20of%20regular%20food%20supplies.

Time will tell what options those opposing Russia’s invasion of Ukraine or who are suffering from food shortages caused by the war are able to implement to address the food security challenges that will likely harm tens of millions of people around the world. See May 24, 2022:  How severe is the food security challenge?, https://currentthoughtsontrade.com/2022/05/24/how-severe-is-the-food-security-challenge/.

How severe is the food security challenge?

· May 24, 2022 · food security · , , · No Comments

The lead story in the New York Times on May 24, 2022 had the following headline — Live Updates: World Leaders Call for Action to Free Trapped Ukrainian Food. https://www.nytimes.com/live/2022/05/24/world/russia-ukraine-war (“Russia’s blockade of seaports and attacks on grain warehouses have choked off one of the world’s breadbaskets. Western officials are accusing Russia of using food as a weapon.”). The article reviews presentations made at the World Economic Forum this week by European Commission President Ursula von der Leyen and UN World Food Programme Executive Director David Beasley.

EC President von der Leyen’s statement at Davos is copied in part below (section dealing with food security) and includes both the EU view on the challenges being faced as well as steps the EU is taking to try to reduce the severity of the food insecurity crisis. See European Commission, Special Address by President von der Leyen at the World Economic Forum, Davos, 24 May 2022, https://ec.europa.eu/commission/presscorner/detail/en/SPEECH_22_3282.

“We are witnessing how Russia is weaponising its energy supplies. And indeed, this is having global repercussions. Unfortunately, we are seeing the same pattern emerging in food security. Ukraine is one of the world’s most fertile countries. Even its flag symbolises the most common Ukrainian landscape: a yellow field of grain under a blue sky. Now, those fields of grain have been scorched. In Russian-occupied Ukraine, the Kremlin’s army is confiscating grain stocks and machinery. For some, this brought back memories from a dark past – the times of the Soviet crop seizures and the devastating famine of the 1930s. Today, Russia’s artillery is bombarding grain warehouses in Ukraine – deliberately. And Russian warships in the Black Sea are blockading Ukrainian ships full of wheat and sunflower seeds. The consequences of these shameful acts are there for everyone to see. Global wheat prices are skyrocketing. And it is the fragile countries and vulnerable populations that suffer most. Bread prices in Lebanon have increased by 70%, and food shipments from Odessa could not reach Somalia. And on top of this, Russia is now hoarding its own food exports as a form of blackmail – holding back supplies to increase global prices, or trading wheat in exchange for political support. This is: using hunger and grain to wield power.

“And again, our answer is and must be to mobilise greater collaboration and support at the European and global level. First, Europe is working hard to get grain to global markets, out of Ukraine. You must know that there are currently 20 million tons of wheat stuck in Ukraine. The usual export was 5 million tons of wheat per month. Now, it is down to 200,000 to 1 million tons. By getting it out, we can provide Ukrainians with the needed revenues, and the World Food Programme with supplies it so badly needs. To do this, we are opening solidarity lanes, we are linking Ukraine’s borders to our ports, we are financing different modes of transportation so that Ukraine’s grain can reach the most vulnerable countries in the world. Second, we are stepping up our own production to ease pressure on global food markets. And we are working with the World Food Programme so that available stocks and additional products can reach vulnerable countries at affordable prices. Global cooperation is the antidote against Russia’s blackmail.

“Third, we are supporting Africa in becoming less dependent on food imports. Only 50 years ago, Africa produced all the food it needed. For centuries, countries like Egypt were the granaries of the world. Then climate change made water scarce, and the desert swallowed hundreds of kilometres of fertile land, year after year. Today, Africa is heavily dependent on food imports, and this makes it vulnerable. Therefore, an initiative to boost Africa’s own production capacity will be critical to strengthen the continent’s resilience. The challenge is to adapt farming to a warmer and drier age. Innovative technologies will be crucial to leapfrog. Companies around the world are already testing high-tech solutions for climate-smart agriculture. For example, precision irrigation operating on power from renewable; or vertical farming; or nanotechnologies, which can cut the use of fossil fuels when producing fertilisers.

“Ladies and Gentlemen,

“The signs of a growing food crisis are obvious. We have to act urgently. But there are also solutions, today and on the horizon.

“This is why – again, an example of cooperation – I am working with President El-Sisi to address the repercussions of the war with an event on food security and the solutions coming from Europe and the region. It is time to end the unhealthy dependencies. It is time to create new connections. It is time to replace the old chains with new bonds. Let us overcome these huge challenges in cooperation, and that is in the Davos spirit.”

The New York Times article provides excerpts from Mr. Beasley’s comments. “’It’s a perfect storm within a perfect storm,’ said David Beasley, the executive director of the World Food Program, a United Nations agency. ‘If we don’t get the port of Odesa open, it will compound our problems.’ Calling the situation ‘absolutely critical,’ he warned, ‘We will have famines around the world.’”

The UN World Food Programme has a press release on its webcite that addresses the food security crisis caused by the war in Ukraine. See UN World Food Programme, Failing to open Ukrainian ports means declaring war on global food security, WFP Chief warns UN Security Council, 19 May 2022, https://www.wfp.org/news/failing-open-ukrainian-ports-means-declaring-war-global-food-security-wfp-chief-warns-un. The release is copied below.

“NEW YORK – The UN World Food Programme (WFP) Executive Director, David Beasley, addressed the United Nations Security Council today on the impact of the war in Ukraine on global food security. Here are selected highlights from his remarks:

“’We truly are in an unprecedented crisis. Food pricing is our number one problem right now, as a result of all this perfect storm for 2022. But by 2023 it very well will be a food availability problem. When a country like Ukraine that grows enough food for 400 million people is out of the market, it creates market volatility, which we are now seeing.

“’In 2007 and 2008, we all witnessed what happened when pricing gets out of control. There were over 40 nations with political unrest, riots and protests. We’re already seeing riots and protesting taking place as we speak. Sri Lanka, Indonesia, Pakistan, Peru… We’ve seen destabilizing dynamics already in the Sahel from Burkina Faso, Mali, Chad… these are only signs of things to come. And we have enough historical experience to understand the consequences when we failed to act. When a nation that is the breadbasket of the world becomes a nation with the longest bread lines of the world, we know we have a problem.

“’As the Secretary General clearly spoke, we’re now reaching about 4 million people inside Ukraine. In fact, we’re scaling up to 900,000 on cash-based transfers as we speak. That will put liquidity back into the marketplace, but that does not solve the problem outside of Ukraine. That’s why we’ve got to get these ports running. We’ve got to empty the silos so that we can help stabilize the food crisis that we’re facing around the world.

“’Truly, failure to open those ports in Odesa region will be a declaration of war on global food security. And it will result in famine and destabilization and mass migration around the world.

“’Leaders of the world, it’s time that we do every possible thing that we can to bring the markets to stability because things will get worse, but I do have hope. We averted famine. We averted destabilization over the past many years because many of you in this room stepped up and we delivered. And we can do that again. But we’ve got things that have to happen. Getting the ports open, stabilizing the markets, increasing production around the world. We’ll get through this storm, but we must act and we must act with urgency.’”

See also, reliefweb, War in Ukraine: WFP renews call to open Black Sea ports amid fears for global hunger, originally posted on May 20, 2022, updated May 22, 2022, https://reliefweb.int/report/world/war-ukraine-wfp-renews-call-open-black-sea-ports-amid-fears-global-hunger#:~:text=The%20World%20Food%20Programme%20(WFP,of%20lives%20%E2%80%93%20around%20the%20world (“In impassioned pleas to the specially convened ‘call to action’ group on 18 May, attended by US Secretary of State Antony Blinken and the UN Secretary-General António Guterres, Beasley added: ‘The silos are full. Why are the silos full? Because the ports are not operating … It is absolutely essential that we allow these ports to open because this is not just about Ukraine, this is about the poorest of the poor around the world who are on the brink of starvation as we speak’”.).

As reviewed in earlier posts, there are production issues on grains in a number of other countries flowing from heat or draught or low inventories. Challenges in other countries are complicating the ability to substitute products from other countries for the large volumes not being shipped from Ukraine. See May 16, 2022:  Wheat prices spike following Indian export ban, https://currentthoughtsontrade.com/2022/05/16/wheat-prices-spike-following-indian-export-ban/; May 15, 2022:  India bans exports of wheat, complicating efforts to address global food security problems posed by Russia’s war in Ukraine, https://currentthoughtsontrade.com/2022/05/15/india-bans-exports-of-wheat-complicating-efforts-to-address-global-food-security-problems-posed-by-russias-war-in-ukraine/; April 19, 2022:  Recent estimates of global effects from Russian invasion of Ukraine, https://currentthoughtsontrade.com/2022/04/19/recent-estimates-of-global-effects-from-russian-invasion-of-ukraine/; April 19, 2022:  Recent estimates of global effects from Russian invasion of Ukraine, https://currentthoughtsontrade.com/2022/04/19/recent-estimates-of-global-effects-from-russian-invasion-of-ukraine/.

While many countries are expressing the desire to help out in the crisis and while the WTO and other multilateral organizations are taking or talking about some actions that are available to them, the crisis is likely to significantly worsen in the coming months as there is little likelihood that Russia will permit the reopening of the Black Sea ports to Ukrainian wheat and other products. The crisis will likely exceed the level of the challenges from the 2007-2008 period and will reduce global GDP growth, including forcing some areas into recession, will increase starvation and malnurishment and result in increased political instability in a number of countries around the world. Expect larger parts of the global community to view Russia as a pariah state. While trade is an important part of the answer, the war started by Russia is not controllable by global trade rules in fact. We are in for a challenging period with much of the harm born by those least able to handle the harm being inflicted.

Wheat prices spike following Indian export ban

· May 16, 2022 · food security · , , · No Comments

In yesterday’s post, I reviewed India’s decision to restrict exports of wheat last Friday. May 15, 2022:  India bans exports of wheat, complicating efforts to address global food security problems posed by Russia’s war in Ukraine, https://currentthoughtsontrade.com/2022/05/15/india-bans-exports-of-wheat-complicating-efforts-to-address-global-food-security-problems-posed-by-russias-war-in-ukraine/. Despite India’s efforts to walk back the extent of the export ban on Saturday, world market prices for wheat shot up on May 16. See, e.g., Financial Times, Wheat prices rise almost 6% as India export ban shakes markets, May 16, 2022, https://www.ft.com/content/226f3f09-33ff-40c8-b439-08a36c515aba (“Wheat prices rose by the maximum amount allowed on Monday after India imposed a ban on exports, stoking pressure on food costs as tight global supplies roiled international markets. Futures traded in Chicago rose as much as 5.9 per cent to $12.47 a bushel, their highest level in two months.”); Bloomberg, Wheat Soars in Risk to Food Inflation as India Restricts Exports, May 15, 2022 updated May 16, 2022, https://www.bloomberg.com/news/articles/2022-05-15/world-s-food-problems-piling-up-as-india-restricts-wheat-exports (“Wheat jumped by the exchange limit to near a record high after India’s move to restrict exports, exposing just how tight global supplies are during the war in Ukraine and threatening to drive up food prices even more.”); Market Watch,  Wheat prices surge to highest in more than 2 months following India’s ban on exports, May 16, 2022, https://www.marketwatch.com/story/wheat-prices-surge-to-highest-in-more-than-two-months-following-indias-ban-on-exports-11652683058 (“India’s Commerce Secretary B.V.R. Subrahmanyam told reporters on Sunday that the country’s wheat production has dropped by 3 million tons from 106 million tons last year. Prices have surged 20% to 40% in India. However, India also said Sunday that it would continue to export to needy nations — the country mainly provides wheat to Bangladesh, Nepal and Sri Lanka. India consumes most of what it produces, exporting 7 million tons of wheat last year out of 109 million tons produced, said Subrahmanyam.”); Quartz India, India’s wheat export ban is another reality check for its lofty soft power goals, May 16, 2022, https://qz.com/india/2165965/indias-wheat-export-ban-sends-global-prices-soaring/ (“A few weeks ago, it [India] claimed it could feed the world should the World Trade Organization allow it. Later, on May 4, prime minister Narendra Modi reiterated his desire to “save the world from hunger.” After all, in the wake of the Russia-Ukraine war, India had got the perfect window to become a major wheat exporter. On May 14, however, India banned the export of wheat, largely owing to a record high domestic food inflation. Lower yield due to intense heat waves piled on the country’s agony.”).

Based on the price spike today being capped by daily exchange rate increase limits, India’s action will likely result in even higher prices in the coming days.

The U.S., EU and others are looking at ways to reduce the food insecurity flowing from the Russian war in Ukraine including looking to help Ukraine export its agricultural products through western Europe. U.S. Secretary of State Anton Blinken was in Berlin this past weekend and at a press conference noted efforts that will take place in New York this week. See U.S. Department of State, Secretary Antony J. Blinken at a Press Availability, Berlin, May 15, 2022, https://www.state.gov/secretary-antony-j-blinken-at-a-press-availability-18/ (excerpts copied below).

“We’ve marshaled a robust transatlantic response to the humanitarian crisis caused by the war – more than 6 million Ukrainians have fled their homeland.  They’ve been welcomed in countries across Europe and across the Atlantic.  The United States has provided millions of dollars in assistance to countries taking in Ukrainian citizens to help provide essential support and services.  Our countries are also coming together to address some of the broader consequences that are flowing from Russia’s aggression, like the global food shortages and rising food prices that we’re seeing.  Ukraine supplies a great deal of the world’s corn, its wheat, its oil seeds for cooking oil.

“Russia is blocking Ukraine’s ports; it’s destroying its farmland, warehouses, roads, equipment.  That’s not only striking a major blow to Ukraine’s economy, but it’s also designed to inflict pain on the rest of the world to weaken support to the Ukrainian people.  Later this week in New York, we will be convening an emergency session of the UN Security Council and also the foreign ministers to focus on the steps that we can take together to address the immediate challenges for food and to address food insecurity, as well as to look at some of the medium-term and longer-term answers to food insecurity.”

While the WTO Director-General and a significant number of WTO Members are looking for action at the WTO’s 12 Ministerial Conference starting on June 12th not only on a WTO response to the COVID-19 pandemic but also on addressing the problem of rising food insecurity, a number of major countries are having trouble not restricting agricultural exports and hence are exacerbating the challenges of food insecurity which have been worsened by the Russian war in Ukraine. Actions like that taken by India will complicate the global response to food insecurity and cause even higher world prices for core agricultural commodities.

India bans exports of wheat, complicating efforts to address global food security problems posed by Russia’s war in Ukraine

· May 15, 2022 · food security · · No Comments

While the WTO permits countries to restrict exports of agricultural products in certain circumstances, history is replete with examples of price swings being exacerbated by the imposition of export restraints on food. As reviewed in a recent post, Russia’s war in Ukraine has caused already high food prices to spike to all time highs in products like wheat where Ukraine and Russia are major exporters. April 19, 2022:  Recent estimates of global effects from Russian invasion of Ukraine, https://currentthoughtsontrade.com/2022/04/19/recent-estimates-of-global-effects-from-russian-invasion-of-ukraine/; March 30, 2022:  Food security challenges posed by the Russian invasion of Ukraine, https://currentthoughtsontrade.com/2022/03/30/food-security-challenges-posed-by-the-russian-invasion-of-ukraine/.

While many WTO Members are urging the WTO membership to avoid imposition of export restraints at the present time to reduce food insecurity, a number of countries have shut down exports to protect their domestic consumers. India, which is the world’s second largest producer of wheat and had been looked to to help reduce the challenges in Africa and Asia from Ukraine’s inability to get grain harvested or exported, has faced very high temperatures this spring. In the last days, it has reversed its position of increasing exports to help countries in need to the position of shutting off exports immediately with the exception of volumes under contract and with a possible willingness to work with countries with food security issues. See Reuters, India bans wheat exports as heat wave hurts crop, domestic prices soar, May 15, 2022, https://www.reuters.com/markets/commodities/india-prohibits-wheat-exports-with-immediate-effect-2022-05-14/ (“India banned wheat exports on Saturday days after saying it was targeting record shipments this year, as a scorching heat wave curtailed output and domestic prices hit a record high. The government said it would still allow exports backed by already issued letters of credit and to countries that request supplies ‘to meet their food security needs’.”); Washington Post, India bans wheat exports amid soaring global prices, May 14, 2022, https://www.washingtonpost.com/world/2022/05/14/india-wheat-ban-ukraine/ (“In a Commerce Ministry order, Indian officials said they made the decision after considering India’s own needs and those of neighboring countries. India’s food security was ‘at risk’ because of surging international prices, the ministry said. The announcement was an abrupt reversal weeks after Indian officials and international analysts talked up the possibility of India’s significantly ratcheting up exports to fill the gap created partly by the war in Ukraine. International food prices have soared to record highs in recent months, putting pressure on billions of people, particularly the world’s poorest, officials at the United Nations have warned.”); ABC News, India open to exporting wheat to needy nations despite ban, May 15, 2022, https://abcnews.go.com/International/wireStory/india-open-exporting-wheat-needy-nations-ban-84728532 (“India on Sunday said it would keep a window open to export wheat to food-deficit countries at the government level despite restrictions announced two days earlier. India’s Commerce Secretary B.V.R. Subrahmanyam told reporters the government will also allow private companies to meet previous commitments to export nearly 4.3 million tons of wheat until July. India exported 1 million tons of wheat in April.”); The Times of India, Explained: Why India has banned wheat exports despite big trade plans, May 14, 2022, https://timesofindia.indiatimes.com/business/india-business/explained-why-did-india-ban-wheat-exports-despite-big-trade-plans/articleshow/91565703.cms; Hindustan Times, G7 criticises India decision to stop wheat exports: Germany, May 14, 2022, https://www.hindustantimes.com/world-news/g7-criticises-india-decision-to-stop-wheat-exports-germany-101652533657311.html (“‘If everyone starts to impose export restrictions or to close markets, that would worsen the crisis,’ German agriculture minister Cem Ozdemir said at a press conference in Stuttgart.”).

Press accounts indicate that China’s wheat production for this year is uncertain because of weather considerations as well. See New York Times, War and Weather Sent Food Prices Soaring. Now, China’s Harvest Is Uncertain, May 12, 2022, https://www.nytimes.com/2022/05/11/business/china-wheat-food-prices-inflation.html (“Ukraine’s wheat exports have been mostly halted since Russia’s invasion, while drought has damaged crops in India and the United States. China’s upcoming harvest is another concern..”).

The U.S. Department of Agriculture develops periodic forecasts for production and consumption of major agricultural crops. USDA released its latest global forecast for various crops for 2022-2023 including wheat on May 12, 2022. See USDA, World Agricultural Supply and Demand Estimates, May 12, 2022, https://www.usda.gov/oce/commodity/wasde/wasde0522.pdf. The description of wheat supply and demand is copied below.

“WHEAT: The outlook for 2022/23 U.S. wheat is for reduced supplies, exports, domestic use stocks,
and higher prices. U.S. 2022/23 wheat supplies are projected down 3 percent, as lower beginning
stocks more than offset a larger harvest. All wheat production for 2022/23 is projected at 1,729
million bushels, up 83 million from last year, as higher yields more than offset a slight decrease in
harvested area. The all wheat yield, projected at 46.6 bushels per acre, is up 2.3 bushels from last
year. The first survey-based forecast for 2022/23 winter wheat production is down 8 percent from last
year as lower Hard Red Winter and Soft Red Winter production more than offset an increase in White
Wheat production. Abandonment for Winter Wheat is the highest since 2002 with the highest levels in
Texas and Oklahoma. Spring Wheat production for 2022/23 is projected to rebound significantly from
last year’s drought-reduced Hard Red Spring and Durum crops primarily on return-to-trend yields.

“Total 2022/23 domestic use is projected down 1 percent on lower feed and residual use more than
offsetting higher food use. Exports are projected at 775 million bushels, down from revised 2021/22
exports and would be the lowest since 1971/72. Projected 2022/23 ending stocks are 6 percent
lower than last year at 619 million bushels, the lowest level in nine years. The projected 2022/23
season-average farm price (SAFP) is a record $10.75 per bushel, up $3.05 from last year’s revised
SAFP. Wheat cash and futures prices are expected to remain sharply elevated through the first part
of the marketing year when the largest proportion of U.S. wheat is marketed.

“The global wheat outlook for 2022/23 is for lower supplies and consumption, increased trade, and
lower ending stocks. Global production is forecast at 774.8 million tons, 4.5 million lower than in
2021/22. Reduced production in Ukraine, Australia, and Morocco is only partly offset by increases in
Canada, Russia, and the United States. Production in Ukraine is forecast at 21.5 million tons in
2022/23, 11.5 million lower than 2021/22 due to the ongoing war. Canada’s production is forecast to
rebound to 33.0 million tons in 2022/23, up significantly from last year’s drought-affected crop.

“Projected 2022/23 world use is slightly lower at 787.5 million tons, as increases for food use are more
than offset by declining feed and residual use. The largest feed and residual use reductions are in
China, the European Union, and Australia as well as a sizeable decline in food use in India.
Projected 2022/23 global trade is a record 204.9 million tons, up 5.0 million from last year. Imports
are projected to rise on increased exportable supplies from Russia and Canada more than offsetting
reductions for Ukraine and Australia. Russia is projected as the leading 2022/23 wheat exporter at
39.0 million tons, followed by the European Union, Australia, Canada, and the United States.
Ukraine’s 2022/23 export forecast is 10.0 million tons, down sharply from last year on reduced
production and significant logistical constraints for exports. India is expected to remain a significant
wheat exporter in 2022/23. Projected 2022/23 world ending stocks are reduced 5 percent to 267.0
million tons and would be the lowest level in six years. The largest change is for India, where stocks
are forecast to decline to 16.4 million tons, a five-year low.”

With likely reduced availability of product globally and with reduced stocks of wheat on hand, tThe G7, led by the EU and US, are working to find ways to help Ukraine move its wheat production to export despite Russia’s closure of the Black Sea. Such efforts if successful will reduce the global damage done on food security on products like wheat. As reviewed in my last post,

“The EU is working to facilitate movement of Ukrainian agricultural products by land through EU member states. But the main challenges are the blockage of Black Sea ports by Russia and the reported theft of agricultural products and equipment from Ukrainian farms and depots. See, e.g., CNN, Russians steal vast amounts of Ukrainian grain and equipment, threatening this year’s harvest, May 5, 2022, https://www.cnn.com/2022/05/05/europe/russia-ukraine-grain-theft-cmd-intl/index.html; Voice of America, Russian Blockade of Ukrainian Sea Ports Sends Food Prices Soaring, May 7, 2022, https://www.voanews.com/a/russian-blockade-of-ukrainian-sea-ports-sends-food-prices-soaring/6561914.html; Politico, EU plans to help Ukraine’s food exports dodge Black Sea blockade, EU farm chief warns Russia wants to portray itself as feeding the poor, while it destroys Ukraine’s farmland. May 10, 2022, https://www.politico.eu/article/eu-plans-to-boost-ukraines-food-exports-black-sea-blockade/.”

May 11, 2022:  Less than five weeks to the WTO’s 12th Ministerial Conference — what are likely deliverables?, https://currentthoughtsontrade.com/2022/05/11/less-than-five-weeks-to-the-wtos-12th-ministerial-conference-what-are-likely-deliverables/.

Hopefully, India will in fact work to facilitate exports to many of the nations dependent on wheat from Ukraine in the coming months to help reduce the food insecurity flowing from Russia’s war in Ukraine. But the announcement on Friday of banning exports is a concerning signal and will likely lead to even higher prices for wheat in the coming weeks and months.

Food security challenges posed by the Russian invasion of Ukraine

· March 30, 2022 · food security, Sanctions on Russia following its invasion of Ukraine · , · No Comments

Ukraine and Russia are important exporters of wheat, corn and sunflower oil. See, e.g., WTO Trade Profiles 2021 at 376 (Ukraine top three agricultural expoers were sunflower-seed, or cotton oil ($5.32 billion), corn ($4.885 billion) and wheat and meslin ($3.594 billion)) and 298 (Russian Federation, top two agricultural exports were wheat and meslin ($6.403 billion), sunflower seed or cotton oil ($2.206 billion). Ukraine’s exports in 2022 are certain to be disrupted by the Russian war in the country which is harming infrastructure, the ability of farmers to plant crops, increasing input costs and maritime costs. Effects on Russian exports are less clear but could be affected as well.

The United Nation’s Food and Agriculture Organization (FAO) released an updated evaluation of risks on food security both for Ukrainians and for the world from the ongoing conflict last week (March 25), See FAO, Information Note, The importance of Ukraine and the Russian Federation for global agricultural markets and the risks associated with the current conflict, 25 March 2022 Update, https://www.fao.org/3/cb9236en/cb9236en.pdf. The Executive Summary (pages 1-4) is copied below.

“Executive Summary

“1. Market structure, trade profiles and recent price trends

“1.1 Market shares

“• The Russian Federation and Ukraine are among the most important producers of agricultural commodities in the world. Both countries are net exporters of agricultural products, and they both play leading supply roles in global markets of foodstuffs and fertilisers, where exportable supplies are often concentrated in a handful of countries. This concentration could expose these markets to increased vulnerability to shocks and volatility.

“• In 2021, either the Russian Federation or Ukraine (or both) ranked amongst the top three global exporters of wheat, maize, rapeseed, sunflower seeds and sunflower oil, while the Russian Federation also stood as the world’s top exporter of nitrogen fertilizers, the second leading supplier of potassium fertilizers and the third largest exporter of phosphorous fertilizers.

“1.2 Trade profiles

“• Many countries that are highly dependent on imported foodstuffs and fertilizers, including numerous that fall into the Least Developed Country (LDC) and Low-Income Food-Deficit Country (LIFDC) groups, rely on Ukrainian and Russian food supplies to meet their consumption needs. Many of these countries, already prior to the conflict, had been grappling with the negative effects of high international food and fertilizer prices.

“Risk analysis: Assessing the risks emanating from the conflict

“2.1 Trade risks

“• In Ukraine, the escalation of the conflict raises concerns on whether crops will be harvested and products exported. The war has already led to port closures, the suspension of oilseed crushing operations and the introduction of export licensing requirements for some products. All of these could take a toll on the country’s exports of grains and vegetable oils in the months ahead. Much uncertainty also surrounds Russian export prospects, given sales difficulties that may arise as a result of economic sanctions imposed on the country.

“2.2 Price risks

“• FAO’s simulations gauging the potential impacts of a sudden and steep reduction in grain and sunflower seed exports by the two countries indicate that these shortfalls might only be partially compensated by alternative sources during the 2022/23 marketing season. The capacity of many exporting countries to boost output and shipments may be limited by high production and input costs. Worryingly, the resulting global supply gap could raise international food and feed prices by 8 to 22 percent above their already elevated baseline levels.

“• If the conflict keeps crude oil prices at high levels and prolongs the two countries’ reduced global export participation beyond the 2022/23 season, a considerable supply gap would remain in global grain and sunflowerseed markets, even as alternative producing countries expand their output in response to the higher output prices. This would keep international prices elevated well above baseline levels.

“2.3 Logistical risks

“• In Ukraine, there are also concerns that the conflict may result in damages to inland transport infrastructure and seaports, as well as storage and processing infrastructure. This is all the more so given the limited capacity of alternatives, such as rail transport for seaports or smaller processing facilities for modern oilseeds crushing facilities, to compensate for their lack of operation.

“• More generally, apprehensions also exist regarding increasing insurance premia for vessels destined to berth in the Black Sea region, as these could exacerbate the already elevated costs of maritime transportation, compounding further the effects on the final costs of internationally sourced food paid by importers.

“2.4 Production risks

“• Although early production prospects for 2022/23 winter crops were favourable in both Ukraine and the
Russian Federation, in Ukraine, the conflict may prevent farmers from attending to their fields and harvesting and marketing their crops, while disruptions to essential public services could also negatively affect agricultural activities.

“• Current indications are that, as a result of the conflict, between 20 and 30 percent of areas sown to winter crops in Ukraine will remain unharvested during the 2022/23 season, with the yields of these crops also likely to be adversely affected. Furthermore, considerable uncertainties surround Ukrainian farmers’ capacity to plant crops during the fast approaching spring crop cycle.

“• The conflict is also likely to affect the ability of Ukraine to control its animal disease burden, significantly increasing the risk of proliferation of animal diseases, notably of African swine fever (ASF), within Ukraine and in neighbouring countries.

“• In the case of the Russian Federation, although no major disruption to crops already in the ground appears imminent, uncertainties exist over the impact that the international sanctions imposed on the country will have on food exports. Any loss of export markets could depress farmer incomes, thereby negatively affecting future planting decisions.

“• Economic sanctions imposed on the Russian Federation could also disrupt its imports of agricultural inputs, notably pesticides and seeds, on which the country is highly dependent. This could result in less plantings, lower yields and lower qualities, exposing the Russian agricultural sector and global food supplies, at large, to non-negligible risks.

“2.5 Humanitarian risks

“• The conflict is set to increase humanitarian needs in Ukraine, while deepening those of millions of people that prior to its escalation were already displaced or requiring assistance due to the more than eight-year conflict in the eastern part of the country. By directly constraining agricultural production, limiting economic activity and raising prices, the conflict will further undercut the purchasing power of local populations, with consequent increases in food insecurity and malnutrition.

“• Humanitarian needs in neighbouring countries, where displaced populations are seeking refuge, are also set to increase substantially.

“• Globally, if the conflict results in a sudden and prolonged reduction in food exports by Ukraine and the Russian Federation, it will exert additional upward pressure on international food commodity prices to the detriment of economically vulnerable countries, in particular. FAO’s simulations suggest that under such a scenario, the global number of undernourished people could increase by 8 to 13 million people in 2022/23, with the most pronounced increases taking place in Asia-Pacific, followed by sub-Saharan Africa, and the Near East and North Africa. If the war lasts, impacts will go well beyond 2022/23.

“2.6 Energy risks

“• The Russian Federation is a key player in the global energy market. As a highly energy-intensive industry, especially in developed regions, agriculture will inevitably be affected by the sharp increase in energy prices that has accompanied the conflict.

“• Agriculture absorbs high amounts of energy directly, through the use of fuel, gas and electricity, and indirectly, through the use of agri-chemicals such as fertilisers, pesticides and lubricants.

“• With prices of fertilizers and other energy-intensive products rising as a consequence of the conflict, overall input prices are expected to experience a considerable boost. The higher prices of these inputs will first translate into higher production costs and eventually into higher food prices. They could also lead to lower input use levels, depressing yields and harvests in the 2022/23 season, thus giving further upside risk to the state of global food security in the coming years.

“• Higher energy prices also make agricultural feedstocks (especially maize, sugar and oilseeds/vegetable oils) competitive for the production of bio-energy and, given the large size of the energy market relative to the food market, this could pull food prices up to their energy parity equivalents.

“2.7 Exchange rate, debt, and growth risks

“• The Ukrainian hryvnia reached a record low against the United States dollar (USD) in early March 2022, with likely repercussions for Ukrainian agriculture, including a boost to its export competitiveness and curbs on its ability to import.

“• Although their extent remains unclear at this stage, conflict-induced damages to Ukraine’s productive capacity and infrastructure are expected to entail very high recovery and reconstruction costs.

“• The economic sanctions imposed on the Russian Federation have also led to a significant depreciation of the Russian rouble. Although this should make Russian exports of agricultural commodities more affordable, a lasting rouble depreciation would negatively affect investment and productivity growth prospects in the country.

“• Weakening economic activity and a depreciated rouble are also expected to have serious effects on countries in Central Asia through the reduction of remittance flows, as for many of these countries remittances constitute a significant part of gross domestic product (GDP)

“• The current conflict may also have global spillovers. While its impact on the global economy remains uncertain at this stage and will depend on several factors, the most vulnerable countries and populations are expected to be hit hard by slower economic growth and increased inflation, at a time when the world is still attempting to recover from the recession triggered by the COVID-19 pandemic.

“• Agriculture is the backbone of the economies of many developing countries, the majority of which rely on the United States dollar for their borrowing needs. As such, a lasting appreciation of the USD vis-à-vis other currencies may have negative significant economic consequences for these countries, including for their agrifood sectors. Moreover, the potential reduction of GDP growth in several parts of the world will affect global demand for agrifood products with negative consequences for global food security. Lower GDP growth will also likely reduce the availability of funds for development, especially if global military expenses increase.

“Policy recommendations

“• In order to prevent or limit the conflict’s detrimental impacts on the food and agricultural sectors of Ukraine and the Russian Federation, every effort should be made to keep international trade in food and fertilizers open to meet domestic and global demand. Supply chains should be kept fully operational, including by protecting standing crops, livestock, food processing infrastructure, and all logistical systems.

“• In order to absorb conflict-induced shocks and remain resilient, countries that depend on food imports from Ukraine and the Russian Federation will need to find alternative export suppliers for their food needs. They should also rely on existing food stocks and enhance the diversity of their domestic production bases.

“• The food security impacts of the conflict on vulnerable groups necessitate timely monitoring and well-targeted social protection interventions to alleviate the hardship caused by the conflict and to foster a fast recovery from it. To assist the internally displaced people, refugees and groups directly affected by the conflict, the reach of Ukraine’s national social protection system should be expanded by registering additional population groups within the Unified Social Information System.

“• In countries hosting refugees, access to existing social protection systems and job opportunities should also be eased by lifting legal access barriers and, where needed, by increasing the capacity of host countries’ social protection systems to absorb additional caseloads.

“• Countries affected by potential disruptions ensuing from the conflict must carefully weigh measures they put in place against their potentially detrimental effect on international markets including over the longer term. Particularly, export restrictions must be avoided. They exacerbate price volatility, limit the buffer capacity of the global market, and have negative impacts over the medium term.

“• The spread of African swine fever (ASF) and other animal diseases must be contained by improving biosecurity and good husbandry practices at all geographical levels, by taking steps to facilitate early detection, timely reporting and rapid disease containment, and by implementing measures that support virus detection, such as surveillance schemes and targeted sampling of animals.

“• Market transparency and policy dialogue should be strengthened, as they play key roles when agricultural commodity markets are under uncertainty and disruptions need to be minimised to ensure that international markets continue to function properly and that trade in food and agricultural products flows smoothly.”

Figure 15 of the paper (page 10) identifies countries largely dependent on Ukraine and Russia for wheat.

The FAO also released a separate paper on the food security challenges for the people of Ukraine on March 25, 2022. See FAO, Note on the impact of the war on food security in Ukraine, 25 March 2022, https://www.fao.org/3/cb9171en/cb9171en.pdf.

The FAO’s latest Food Price Index (released March 4, 2022, shows agricultural products already at all time highs. See FAO, The FAO Food Price Index rises to a new all-time high in February, Release date: 04/03/2022, https://www.fao.org/worldfoodsituation/foodpricesindex/en/#:~:text=Release%20date%3A%2004%2F03%2F,February%202011%20by%203.1%20points.

As reviewed in a prior post, countries imposing sanctions on Russia, including the G-7 and the EU, are working to minimize the food security issues. March 26, 2022:  Blockage of Accession of Belarus to WTO, additional sanctions on Russia and other recent developments, https://currentthoughtsontrade.com/2022/03/26/blockage-of-accession-of-belarus-to-wto-additional-sanctions-on-russia-and-other-recent-developments/ (“The G-7 Leaders’ Statement on March 24, 2022 outlined their efforts to address the potential food security issues caused by Russia’s invasion of Ukraine. See G-7 Leaders’ Statement, March 24, 2022, paragraphs 17 and 18,  https://www.whitehouse.gov/briefing-room/statements-releases/2022/03/24/g7-leaders-statement/#:~:text=We%2C%20the%20Leaders%20of%20the,against%20independent%20and%20sovereign%20Ukraine. ’17. More immediately, President Putin’s war places global food security under increased pressure. We recall that the implementation of our sanctions against Russia takes into account the need to avoid impact on global agricultural trade. We remain determined to monitor the situation closely and do what is necessary to prevent and respond to the evolving global food security crisis. We will make coherent use of all instruments and funding mechanisms to address food security, and build resilience in the agriculture sector in line with climate and environment goals. We will address potential agricultural production and trade disruptions, in particular in vulnerable countries. We commit to provide a sustainable food supply in Ukraine and support continued Ukrainian production efforts. 18. We will work with and step up our collective contribution to relevant international institutions including the World Food Programme (WFP), in parallel with Multilateral Development Banks and International Financial Institutions, to provide support to countries with acute food insecurity. We call for an extraordinary session of the Council of the Food and Agriculture Organization (FAO) to address the consequences on world food security and agriculture arising from the Russian aggression against Ukraine. We call on all participants of the Agriculture Markets Information System (AMIS) to continue to share information and explore options to keep prices under control, including making stocks available, in particular to the WFP. We will avoid export bans and other trade-restrictive measures, maintain open and transparent markets, and call on others to do likewise, consistent with World Trade Organization (WTO) rules, including WTO notification requirements.’”).

The issue is taking center stage at the WTO as reviewed in a recent press notice from the WTO on the Director-General’s comments at an informal meeting of the General Council. See WTO news release, DG Okonjo-Iweala: “This is not the time to retreat inward,” 28 March 2022, https://www.wto.org/english/news_e/news22_e/dgno_28mar22_e.htm. Some of the news release is copied below.

“’For dozens of poor countries and tens of millions of people, basic food security is in danger,” she warned. “These countries already have been some of the slowest economic recoveries from the pandemic, and international cooperation on trade is necessary to help mitigate risks of poverty, hunger, even famine and social unrest.’

“The Director-General noted that the UN Secretary-General has set up a three-tiered steering committee involving heads of government, heads of international organizations and technical experts to deal with the issue of surging energy and food prices. 

“The WTO is also expected to play a key role in finding solutions to the food crisis, the Director-General noted. The chair of the WTO’s agriculture negotiations, Ambassador Gloria Abraham Peralta of Costa Rica, is planning a food security conference that will take place at the end of April.  WTO Secretariat staff have also been carrying out analysis on food security issues which will be shared with members shortly.

“’We at the WTO have a solid basis on which to consider workable solutions to the present crisis,” the DG declared.

“In the near-term, international cooperation on trade will be needed to minimize the impact of supply crunches for key commodities where prices are already high by historical standards and to keep markets functioning smoothly, the Director-General said. While only 12 members have imposed export restrictions on food to date, coordinated government action is needed to avoid a repeat of the cascading export restrictions that exacerbated the rise of food prices in the crisis of 2008-2010.

“In addition, countries with buffer stocks that can afford to share could coordinate the release of wheat, barley, other cereals and grains and oils into international markets, thereby alleviating the supply squeeze.  Countries such as the United States, Canada, Australia, Argentina, and France could increase wheat cultivation while others such as China, Germany, Morocco, Saudi Arabia, Egypt, and Nigeria could increase global supply of fertilizer. Africa, with plentiful land and other resources, can also take steps to produce more food itself by using more adaptable varieties of wheat, maize and other crops.

“Trade facilitation measures could also be brought into play to ease the free flow of goods, while efforts should be made to allow the UN’s World Food Programme full access to humanitarian purchases. Prompt notification and information sharing regarding food supplies and stockpiles can help the international community better manage the situation and keep markets functioning more smoothly.”

WTO Members have a poor track record of not retreating from sharing core commodities during periods of shortages, which actions result in increased price volatility and significant harm to food importing nations. The transparency exercise as part of the COVID-19 pandemic on actions on both medical goods and agricultural products has improved the ability to understand actions being taken. But to date, Members continue to take actions to restrict exports when internal food security concerns arise.

I have written with former colleagues a number of papers in the past looking at the food security problems during earlier periods in the last fifteen years and the risks of social unrest that arise for many countries when core commodities become unaffordable. They are imbedded below.

GDP

1-Stewar-Manaker

2-2015-Global-Hunger-and-the-WTO-how-the-International-Trade-Rules-Address-Food-Security

Let’s hope that the focus of the G-7, EU and agricultural exporting countries and the attention being given to the issue at the WTO will result in a minimization of increased food insecurity to people around the world in the coming months.

WTO Secretariat Information Note on COVID-19 and Agriculture

· August 28, 2020 · COVID-19, food security, transparency · , , · No Comments

On Wednesday, August 26, the WTO Secretariat put out an Information Note entitled “COVID-19 and Agriculture: A Story of Resilience”. It is one in an impressive line of information notes providing useful information on how COVID-19 is affecting global trade in goods and services. The full array of information notes published to date can be found on the WTO webpage, https://www.wto.org/english/tratop_e/covid19_e/covid19_e.htm. Wednesday’s Information Note is embedded below.

agric_report_e

The note focuses on the fact that trade in agricultural goods have fared better than total trade in goods during the pandemic. The Secretariat, at the time of preparing the Information Note, had access to trade data through April 2020 and for May 2020 for some countries. A key summary paragraph from the note states:

“Trade in agricultural products has been more resilient than overall trade. This reflects the essential nature of food and the resulting relative income-inelasticity of demand for it, as well as the fact that most agricultural trade (notably cereals and oilseeds) takes place in bulk marine shipments that have not been subject to major disruptions. While overall merchandise trade fell sharply in the first half of 2020, agricultural and food exports increased by 2.5 per cent during the first quarter of the year compared to the same period in 2019, with an increase of 3.3 per cent in March, followed by a 0.6 per cent increase in April, although the preliminary data for May indicate a small decrease (-1.3 per cent) compared to 2019.2

“2 Data for May 2020 were available for a limited set of 64 countries at the time of writing.”

Importantly, while some governments imposed export restrictions on some agricultural products early in response to COVID-19, some of those restrictions have been lifted and there have been other initiatives to liberalize trade in agriculture.

However, the note reviews the challenges for many people to get adequate food despite food stocks and good harvests. A prior August 15 post of mine reviewed the challenges facing many nations in accessing adequate food supplies in 2020. See August 15, 2020,  Food security and COVID-19 – how World Trade Organization Members could fill a pressing need, https://currentthoughtsontrade.com/2020/08/15/food-security-and-covid-19-how-world-trade-organization-members-could-fill-a-pressing-need/

The Information Note’s conclusion provides a note of caution on agricultural trade despite the greater resilience of such trade over other trade in goods:

“The COVID-19 crisis has had a major impact on the global economy and trade. Countries are still fighting the pandemic, and its repercussions for food supply chains are still unfolding. While agricultural trade has proven more resilient than trade in other goods owing to the essential nature of food products, additional disruptions to supply chains could start to undermine this resilience, with damaging consequences.

“There is currently no supply-related reason why the ongoing health crisis should turn into a food crisis. However, disruptions to food supply chains constitute a risk for global food security. Governments’ trade policy choices will play a major role in shaping how the situation evolves.

“Transparency remains crucial for food security. Incomplete or insufficient information creates uncertainty that, in turn, leads to sub-optimal policy decisions. Sharing timely information on trade-related measures, as well as making information available on production, consumption, stocks and food prices, would help markets function efficiently and contribute to ensuring global food security.”

U.S. example on agricultural exports suggests greater contraction in 2nd quarter of 2020

U.S. trade data are available through June 2020. At least for the United States, U.S. domestic exports of agricultural products (HS Chapters 01-24) through June 2020 were off from 2019 levels (which were themselves below 2018 levels). On a monthly basis, the contraction worsens month by month after February as the below data on U.S. domestic exports of agricultural goods show (exports are FAS values in billions of US $):

1st half 2018$69.3
1st half 2019$65.6
1st half 2020$64.0
% change 2019-2020-2.50%
% change Jan. 2019-2020+0.13%
% change Feb. 2019-2020+5.04%
% change March 2019-2020-1.46%
% change April 2019-2020-3.95%
% change May 2019-2020-7.17%
% change June 2019-2020-7.67%

U.S. domestic exports of agricultural goods show dramatic differences in trends in 2020 based on the 2-digit HS chapter involved. Chapter 02, meat and edible meat offal, increased in the first half of 2020 by 8.4%; Chapter 04, dairy produce and other products, increased 17.27%Chapter 10, cereals, increased by 1.13%; Chapter 15, animal fats and oils and their cleavage products, increased 23.19%; Chapter 23, residue and waste from the food industry, prepared animal feed, increased 2.43%; the other nineteen Chapters showed declines up to 15.17%.

For the United States, the U.S.-China Phase 1 Agreement appears likely to improve U.S. agricultural exports in the last months of 2020 and hence may change the U.S. trade trend for agricultural goods in the third and fourth quarters. See August 8, 2020,  U.S.-China Phase 1 trade agreement – review of U.S. domestic exports through June 2020, https://currentthoughtsontrade.com/2020/08/08/u-s-china-phase-1-trade-agreement-review-of-u-s-domestic-exports-through-june-2020/.

But the above data for the U.S. suggests that global agricultural trade may be harder hit in the second quarter than the Secretariat Information Note tracks through April (and for partial data for May). All of which simply says the Information Note’s conclusion that transparency and accuracy and timeliness of data are critical at the present time to prevent the COVID-19 health crisis from becoming a food security crisis of even greater proportions than is already projected by the World Food Programme.

Food security and COVID-19 — how World Trade Organization Members could fill a pressing need

· August 15, 2020 · COVID-19, food security · , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , · No Comments

In 2020 as the world has been dealing with the health and economic consequences of the COVID-19 pandemic, the World Trade Organization has focused attention on keeping markets open by urging Members to provide notifications of trade restrictive and trade liberalizing measures taken not just on medical goods but also on agricultural products. The G20 countries and various groups of WTO Members have made commitments to impose restrictions only under limited circumstances and only temporarily, consistent with WTO obligations. Some Members have urged countries to agree not to impose export restraints on agricultural goods to limit worsening challenges during the COVID-19 pandemic. On agricultural export restrictions, a number of countries have applied some restrictions despite information that global food supplies are sufficient which should make restrictions unnecessary. The attention paid to the issue by the WTO and its Members have limited the number of countries engaged in agricultural export restraints which is a positive development.

With the steps many countries have taken to limit the spread of the COVID-19, there has been enormous economic pain incurred by most countires, with tens of millions of people in countries temporarily unemployed, schools closed, food distribution disrupted with the closure of restaurants which constitute a large part of food shipped from processing plants and farms.

The UN, World Bank and others have projected huge increases in the number of people pushed into extreme poverty because of the effects flowing from the pandemic. Extreme poverty brings with it food security issues as people suffering extreme poverty don’t have the means to procure basic food needs.

The United Nation’s World Food Programme (WFP) has long been involved in helping address food security needs around the world. In the COVID-19 pandemic, the WFP is mobilizing to provide assistance to some 138 million people in 83 countries. With most countries occupied with dealing with the needs of their own populations, countries and private citizens have been slow to respond to the humanitarian challenges facing so many around the world. The WFP has appealed for US$4.9 billion to let them perform their stepped up function during COVID-19 through the end of 2020. As of August 6, they had received only 9 percent of what they need, $US440 million.

The WFP during the pandemic has been involved in facilitating services by many NGOs and international organizations. For example, “Over 16,500 health and humanitarian personnel from 288 organizations have now been transported to destinations throughout Africa, Asia, the Middle East and the Commonwealth of Independent States countries by WFP’s air passenger service since its launch on 1 May. 53 destinations are now being served, with approximately 2,500 passengers using WFP’s service per week.” WFP, COVID-19, Level 3 Emergency, External Situation Report #12 (6 August 2020)(emphasis in original). The latest situation report is embedded below and reviews the wide array of services provided as well a review of some of the countries with acute needs. It also provides a link to contribute to the WFP.

WFP-0000118265

The External Situation Report indicates that there are 27 countries (based on an FAO-WFP hotspot analysis) which “are at risk of significant food security deterioration in the next six months”. (page 2). Countries at risk are Guatemala, Honduras, El Salvador, Nicaragua, Haiti, Peru, Ecuador, Colombia, Venezuela, Burkina Faso, Mali, the Niger, Sierra Leone, Liberia, Nigeria, Cameroon, Central African Republic, Democratic Republic of the Congo, Lebanon, Sudan, South Sudan, Mozambique, Zimbabwe, Somalia, Yemen, Ethiopia, Iraq, Syrian Arab Republic, Afghanistan and Bangladesh (total is 31, though Peru, Ecuador, Colombia appear to be at a lower level of risk based on coloration used on page 2). FAO – WFP early warning analsyis of acute food insecurity hotspots, https://docs.wfp.org/api/documents/WFP-0000117706/download/.

Where is the food aid?

For many countries, agricultural production has remained reasonably strong but large volumes of agricultural products have been destroyed based on lack of domestic markets, typically flowing from the collapse of the restaurant trade and the challenges in redirecting product, packaging and labeling into retail channels. See, e.g., New York Times, April 11, 2020, Dumped Milk, Smashed Eggs, Plowed Vegetables: Food Waste of the Pandemic, https://www.nytimes.com/2020/04/11/business/coronavirus-destroying-food.html.

At the same time, there have been huge increases in internal-country demand for help from food banks in some countries. See, e.g., for the United States: Feeding America, The first months of the food bank response to COVID, by the numbers, https://www.feedingamerica.org/hunger-blog/first-months-food-bank-response-covid-numbers.

It would seem that coordinated action by major agricultural goods producers in the WTO with the WFP and other groups should be able to provide large quantities of agricultural goods to those in need globally in the remaining months of 2020, goods which might otherwise simply be destroyed.

Similarly, while all countries are financially stretched during the pandemic, helping WFP obtain the needed financial resources to provide a coordinated pledging event should be of interest to WTO Members and many of the multilateral organizations working on COVID responses, as well as the business community and the general public.

While the WTO has grappled with limiting/eliminating export subsidies for agricultural goods, the WTO has always recognized the need to maintain the flow of humanitarian need particularly in agricultural goods. Consider these paragraphs from the 2015 Nairobi Ministerial Conference Decision on Export Competition (WT/MIN(15)45, WT/L/980 (21 Dec. 2015) at 6-7):

“International Food Aid

“22. Members reaffirm their commitment to maintain an adequate level of international food aid, to take account of the interests of food aid recipients and to ensure that the disciplines contained hereafter do not unintentionally impede the delivery of food aid provided to deal with emergency situations. To meet the objective of preventing or minimizing commercial displacement, Members shall ensure that international food aid
is provided in full conformity with the disciplines specified in paragraphs 23 to 32, thereby contributing to the objective of preventing commercial displacement.

“23. Members shall ensure that all international food aid is:

“a. needs-driven;

“b. in fully grant form;

“c. not tied directly or indirectly to commercial exports of agricultural products or other goods and services;

“d. not linked to the market development objectives of donor Members;
and that

“e. agricultural products provided as international food aid shall not be re-exported in any form, except where the agricultural products were not permitted entry into the recipient country, the agricultural products were determined inappropriate or no longer needed for the purpose for which they were received in the recipient country, or re-exportation is necessary for logistical reasons to expedite the provision of food aid for another country in an emergency situation. Any reexportation in accordance with this subparagraph shall be conducted in a manner that does not unduly impact established, functioning commercial markets of agricultural commodities in the countries to which the food aid is re-exported.

“24. The provision of food aid shall take into account local market conditions of the same or substitute products. Members shall refrain from providing in-kind international food aid in situations where this would be reasonably foreseen to cause an adverse effect on local13 or regional production of the same or substitute products. In addition, Members shall ensure that international food aid does not unduly impact established, functioning commercial markets of agricultural commodities.

“25. Where Members provide exclusively cash-based food aid, they are encouraged to continue to do so. Other Members are encouraged to provide cash-based or in-kind international food aid in emergency situations, protracted crises (as defined by the FAO14), or non-emergency development/capacity building food assistance environments where recipient countries or recognized international humanitarian/food entities, such as the United Nations, have requested food assistance.

“26. Members are also encouraged to seek to increasingly procure international food aid from local or regional sources to the extent possible, provided that the availability and prices of basic foodstuffs in these markets are not unduly compromised.

“27. Members shall monetize international food aid only where there is a demonstrable need for monetization for the purpose of transport and delivery of the food assistance, or the monetization of international food aid is used to redress short and/or long term food deficit requirements or insufficient agricultural production situations which give rise to chronic hunger and malnutrition in least-developed and net food-importing developing countries.15

“28. Local or regional market analysis shall be completed before monetization occurs for all monetized international food aid, including consideration of the recipient country’s nutritional needs, local United Nations Agencies’ market data and normal import and consumption levels of the commodity to be monetized, and consistent with Food Assistance Convention reporting. Independent third party commercial or non-profit
entities will be employed to monetize in-kind international food aid to ensure open market competition for the sale of in-kind international food aid.

“29. In employing these independent third party commercial or non-profit entities for the purposes of the preceding paragraph, Members shall ensure that such entities minimize or eliminate disruptions to the local or regional markets, which may include impacts on production, when international food aid is monetized. They shall ensure that the sale of commodities for food assistance purposes is conducted in a transparent, competitive and open process and through a public tender.16

“30. Members commit to allowing maximum flexibility to provide for all types of international food aid in order to maintain needed levels while making efforts to move toward more untied cash-based international food aid in accordance with the Food Assistance Convention.

“31. Members recognize the role of government in decision-making on international food aid in their jurisdictions. Members recognize that the government of a recipient country of international food aid can opt out of the usage of monetized international food aid.

“32. Members agree to review the provisions on international food aid contained in the preceding paragraphs within the regular Committee on Agriculture monitoring of the implementation of the Marrakesh Ministerial Decision of April 1994 on Measures Concerning the Possible Negative Effects of the Reform Programme on Least-developed and net food-importing developing countries.

“13 The term ‘local’ may be understood to mean at the national or subnational level.

“14 FAO defines protracted crises as follows: ‘Protracted crises refer to situations in which a significant portion of a population is facing a heightened risk of death, disease, and breakdown of their livelihoods.’

“15 Belize, the Plurinational State of Bolivia, Ecuador, Fiji, Guatemala, Guyana, Nicaragua, Papua New Guinea and Suriname shall also have access to this provision.

“16 In the instance where it is not feasible to complete a sale through a public tender, a negotiated sale can be used.”

It is believed that the current WTO provisions on food aid should not pose hurdles to countries providing in kind aid where there are needed food products that can be exported during the pandemic. If that is not the case, then the WTO Members should agree to a temporary waiver of relevant restrictions to permit food aid during the pandemic.

There has been much discussion within the G20, WTO, WHO and other groups that collective action on the medical front is critical to see that medical goods, vaccines, are therapeutics are available equitably and at affordable prices. What one hasn’t seen is the same focus on ensuring that the world’ populations have access to food equitably and at affordable prices. During the pandemic, WTO Members have the opportunity to work together to see that food is not wasted and that food aid is supplemented to the extent possible to alleviate the unique challenges to food security presented by the COVID-19 pandemic.