Russia’s war in Ukraine has created similarly impressive queues in supermarkets as in the COVID-19 pandemic, but unlike the panic of 2020, when the main shortages were toilet paper, masks, gloves, and bleach, now subject to consumerism. panic is food.
But the problem is not just trade or market, but security. Due to the Kremlin’s already complete unpredictability, long-term solutions are being sought instead of temporary ones.
Russia and Ukraine are major exporters of grain and oilseeds, and export restrictions imposed by the two warring countries, as well as the blocking of sea routes in the Black Sea, a major export route, have raised fears of shortages.
In Spain, shelves of sunflower oil have been emptied, and chefs and hosts have debated whether olive oil can replace oil when frying fish. In Bulgaria, after several months of a sharp rise in oil prices, for no apparent reason, except for swollen electricity prices, hysterical buying of promotional quantities, caused the death of one person and led to the depletion of savings of thousands of retirees who are now well stocked with oil. Similar price manipulations have been tested with gas stations, and the government has said it has information on preparing artificial deficits for other foods as well.
Adding to fears about bread were worries from producers about providing fertilizers due to disrupted supplies from Ukraine, Russia, and war-torn Belarus. Fertilizer prices have soared to unexplored market heights and raised questions about whether Europe will be able to secure a sufficient harvest to avoid a food crisis.
And while most experts and governments insist that this will not happen, few deny the risks of increasing global hunger and related poverty, disease, and a new wave of migration to Europe. Without the opportunity to replace lost Ukrainian and Russian imports, many poor countries, especially in Africa and the Middle East, are facing a staple food crisis.
Ukraine and Russia hold about 30% of the world trade in wheat, 32% in exports of barley, 17% in corn, more than half of the trade of sunflower oil, and 20% in sunflower seeds.
Ukraine is the main supplier of maize to the EU (average 9.2 megatons – 57% of supplies), rapeseed (2 megatons – 42% of European imports by volume), sunflower seeds (0.1 megatons – 15%), and sunflower seed cake (1.3 megatons) – 47% of imports). Ukraine also provides 30% of European wheat imports.
Russia has not yet commented on how it will handle food supplies to “enemy countries”, but so far it has provided 11% of wheat imports to the EU, 35% of sunflower seeds, 30% of sunflower oil, and half of the rapeseed for fodder. In addition, Russia is a leading exporter of synthetic nitrogen fertilizers and their components, and Belarus is a significant exporter of potassium-based fertilizers. Moscow has already suspended exports of mineral fertilizers on March 4. And since feed and energy account for 20% of farmers’ production costs in Europe, ensuring them is a matter of security that the EU cannot ignore.
What is happening to grain in Ukraine?
Ukraine’s Agriculture Minister Mykola Solski said in late March that Ukraine typically exports 4-5m tonnes of grain a month, a volume that has now dropped to just several hundred thousand tonnes.
“The impact (on world markets) is direct, dramatic, and significant. The situation is becoming increasingly difficult,” Solski said, predicting that only an end to the war could calm her down.
Ukraine says it has stocks of 13m tonnes of corn and 3.8m tonnes of wheat but cannot export grain because its ports are blocked and more than 90% of its exports go through them.
Uncertainties remain about the sowing and harvesting of spring crops. By the end of March, Ukrainian farmers had sown about 400,000 hectares of various spring crops. That’s 10 percent more than last year, but the agriculture ministry fears the area could be halved by 15 million hectares before the war due to military action and the mobilization of men. As this can mainly affect sunflowers and corn, at the expense of increasing the area sown with cereals such as peas, barley, and oats.
After the invasion, Ukraine stopped exporting rye, oats, millet, buckwheat, salt, sugar, meat, and livestock and introduced licenses to export wheat.
What can Europe do?
The European Commission has already proposed to mobilize its fund in crises by making it possible for European governments to develop their support schemes for producers. According to the Commission, Europe is not in danger of food shortages as it can produce them on its own. However, the agricultural sector is a net importer of specific products, such as feed proteins. This vulnerability, together with high costs for raw materials such as fertilizers and energy, poses production challenges for farmers and can lead to higher food prices.
Additional financial assistance
That is why the EU has announced that it will set aside 479m euros for crisis-affected industries to compensate for more expensive fuels and fertilizers and trade restrictions. The European Commission is also proposing to allow governments to give more advances from mid-October to farmers on their subsidies. It is also considered appropriate to introduce safeguards in support of the pigmeat market, which is particularly affected by feed. It is envisaged to allow the granting of emergency state aid to fertilizer producers and the fisheries sector, where rising fuel prices have significantly increased the costs of fishing vessels and boats.
Money from the EU’s Horizon Europe research program will focus on research and innovation in search of alternatives to fertilizers and greater nitrogen efficiency, the transition to environmentally friendly ammonia for fertilizers, and biomass utilization.
Increasing the cultivated area
The European Commission has stated that it is ready to postpone the introduction of green measures in agriculture to increase the areas that can be planted and thus increase the harvest. According to the rules on biodiversity, farmers must leave part of their fields unoccupied. They will now be able to use them actively and receive their full subsidy, despite deviating from the green rules.
Aid to Ukraine and its export-dependent countries
The EU will also provide 330m euros to Ukraine to provide food, and money for seeds and fodder. Part of the money will be for the rehabilitation of small-scale civil infrastructure for strategic planning and ensuring energy security. In early March, the EU connected its energy transmission system to Ukraine to provide electricity in the event of critical equipment damage.
What seems to be an unresolved issue at the moment are the world’s poorest countries in the Middle East, as well as countries in North Africa that are major customers for Russian and Ukrainian grain imports and where humanitarian aid is likely to need to be increased. For it, the EU wants to attract other major economies, including the United States and Canada, which are also major grain producers.
What else can be done?
The European Parliament proposed in March the opening of food corridors to and from Ukraine through alternative ports, as well as by rail and road. Deputies recommend that Ukrainian farmers be provided with seeds, fuels, and fertilizers.
According to the European Parliament, the EU must organize faster to reduce food waste, which is 88 million tonnes a year in the EU. The EU aims to reduce food waste by 30% by 2025 compared to 2014. It is also recommended that trade sanctions be imposed if Russia restricts imports of European agricultural products, as it did after the annexation of Crimea and the reorientation of European exports to other markets. So far, Western sanctions do not include food, although various companies, manufacturers, traders, and importers have withdrawn from Russia due to difficult payments due to financial constraints.
What can European countries do?
Ultimately, each country will have to deal with supermarket shelves on its own, because countries depend to varying degrees on imports of agricultural products and fertilizers from Russia and Ukraine. Greece has already said that sunflower oil production could be increased, if necessary, by producing more for household consumption than for biofuels.
The Athens government has asked suppliers, such as supermarkets and other food retailers, to declare stocks of products, including flour, cereals, fertilizers, animal feed, sunflower, and other vegetable oils.
Greece has asked the EU to approve grants for soft wheat and corn crops for the period 2023-2027 as an incentive for Greek farmers.
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