Back in January, we pointed out that a food crisis could soon break out. At that time, we reported that the shortage of fertilizers could drive up food prices, especially in developing countries where a large proportion of income is spent on food. Now the situation seems to be worsening not only for fertilizers but also for grains, especially wheat. Ukraine and Russia supply more than a quarter of the world’s wheat. With the outbreak of the war, supply chains have been disrupted, which will have a global impact on prices.
U.S. President Biden made a surprise announcement this week that the food crisis “gonna be real,” adding that this is the price of sanctions.
“With regard to food shortage, yes we did talk about food shortages, and it’s gonna be real. The price of the sanctions is not just imposed upon Russia. It’s imposed upon an awful lot of countries as well, including European countries and our country as well,”
said Biden at a press conference during the NATO summit in Brussels, Belgium.
The World Bank has also noted that food prices have risen sharply and has made proposals to address the looming food price crisis. Mari Elka Pangestu, executive director of the World Bank’s Development Policy and Partnerships Department, has suggested four possible responses, having apparently learned from the 2007-2008 food price crisis.
Among the recommendations are “Keeping food trade open,” “support consumers and vulnerable households through safety nets,” “support farmers,” and “transform food systems so that they can become more resilient and achieve lasting food and nutrition security.”1
“Transformed, food systems can become a cornerstone of green, resilient, and inclusive development, advancing the health of people, economies, and the planet.”
Mari Elka Pangestu
Especially the first point about not imposing global trade restrictions is a lesson learned from the 2007-2008 food crisis when major food-exporting countries restricted their exports for fear of local food shortages.
This will probably bring about what has already become apparent, namely that a real food crisis is coming if it has not already arrived. At the moment, the price increases can still be cushioned because global grain stocks are still very well filled. But in the long term, this will not change the fact that food prices will continue to rise. And as is so often the case, the problem is self-inflicted. The devil is in the details because if Biden’s statement is understood, the rising food prices are a result of the sanctions. Since the sanctions themselves were imposed, they probably started the ball rolling again, just as they did with rising energy prices.
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[1] Four paths to respond to the food price crisis, https://blogs.worldbank.org/voices/four-paths-respond-food-price-crisis