How does war affect food?

Last month, my colleague Oli wrote a blog post on why food is getting more expensive. His blog post focused on supply chain issues caused by COVID and Brexit. I am going to focus on the Russian-Ukraine war and its effect on increasing global food prices, which is going to be another factor in rising costs to consumers.

According to a BBC article, global food prices are tracked by the United Nations’ farming division called the Food and Agriculture Organisation (FOA). Before the Russian-Ukraine conflict even began, the FAO food price index was up 20.7% on February last year, and nearly 4% in one month. Some important highlights from the article were:

  • Meat was up 15% in the year, driven by increased demand for beef and pork. 
  • Dairy rose by 25%, aided by lower than expected milk supply in Western Europe and Oceania.  

Neither of these numbers even included the conflict. However, adding the conflict will only bring up these process higher, while adding additional items to the list. According to the article, the three major items that will be effected are wheat, cooking oil and natural fertilizers used for farming: 

  • Wheat: The BBC article states that “Russia and Ukraine together account for around 30% of internationally traded wheat. Not much comes to Europe, instead going from Black Sea ports to the Middle East and Africa. However, several ports are shut due to the war, and Ukraine’s land infrastructure is being pounded by Russian shells. As a globally traded commodity, that supply disruption means the price goes up for everyone. Securing a futures contract to supply wheat saw a 60% surge last week, and corn was up 15%.” 
  • Cooking oil: “Russia produces around 80% of the world’s vegetable oils, that helps explain an 8.5% rise in one month, according to the FAO, and 37% over the year.”
  • Fertilizer: “Rising energy prices have fed through to higher transport costs of reaching market, and much higher fertilizer prices. The prospect of an oil embargo on Russia, at least for its US and European customers, has sent the price soaring once more. Russia also produces enormous amounts of nutrients, like potash and phosphate – key ingredients in fertilisers, which enable plants and crops to grow. Natural gas is a necessary input for ammonia and nitrates. These are not costs that farmers can easily pass on to customers. The market sets the price. But if fertilizer becomes more expensive, less is used, yields fall, so that total supply falls too, and after some time, prices go up. “

According to another BBC article, the UK does not import many items from Russia or Ukraine, while Africa and Turkey rely heavily on wheat and corn from Ukraine and Russia. More than 40% of Ukraine’s wheat and corn exports went to the Middle East or Africa last year – and disruptions to supply could affect availability in these areas.

While there are no direct imports here in the UK, prices may increase due to associated costs, such as fertilizer. It is still early to really see the effect on prices right now, but we know that cooking oil, wheat and fertilizer will most probably be changed globally the most. 

As this conflict develops, we are hoping that a resolution comes before more countries and items are effected with price hikes.

As major exporters of grain and vegetable oil, conflict around the Black Sea is already disrupting shipping. As global commodities, food price inflation is gathering pace.

By Joe Graham on 10/03/2022