June 12, 2022

Causes of Global Food Crisis and Lessons to Learn

Vikas Rawal

THE world has been facing a food crisis of a magnitude that has not been seen for many decades. The Food and Agriculture Organisation of the United Nations (FAO) has warned that "the number of people facing acute food insecurity and requiring urgent life-saving food assistance and livelihood support continues to grow at an alarming rate". While the crisis has been in the making for some time, it was precipitated by the economic sanctions US and EU have imposed on Belarus and Russia.

Macky Sall, chairperson of the African Union, in which a number of member countries are facing an enormous humanitarian crisis, recently described the situation thus: "Anti-Russia sanctions have made this situation worse. Now we do not have access to grain from Russia, primarily wheat. And most importantly, we do not have access to fertiliser. The situation was bad, and now it has become worse, creating a threat to food security in Africa."

International organisations such as the FAO and the World Food Programme (WFP) have been arguing for a long time that conflicts and wars are the primary causes of the increase in food insecurity in recent years. They have also held the Ukraine-Russia war as being primarily responsible for the recent increases in food prices and insecurity. The Global Network against Food Crises created by the European Union, FAO and WFP has estimated that four crore additional people in 53 most food-insecure countries are in urgent need of food assistance because of the recent spike in food prices and their availability.

While conflicts and climate change do adversely affect food availability, holding them as the primary causes of the rise in food insecurity undermines deeper causes of the current crisis. Even before the Russia-Ukraine war broke out, the world faced a massive and sharply rising incidence of hunger and food insecurity. As per the latest data from FAO, about 237 crore people in the world will face moderate to severe food insecurity in 2020. About 62 crore – the largest in any single country – were in India alone. It is expected that the numbers on food insecurity and hunger will be even higher when updated data are published later this year.

Over the last few decades, globalisation, particularly the international trade regime created under it, has created a sharp imbalance in the levels of support provided to farmers in developed and less developed countries. As a result, the global south has become a source of food commodities that cannot be produced in developed countries, while it has become increasingly dependent on large-scale agriculture in developed countries for staple food commodities.

Over the last three decades, India has become increasingly dependent on imports of pulses and edible oils. Increased price volatility due to trade liberalisation on the one hand and lack of public procurement on the other have dis-incentivised farmers from the cultivation of pulses and oilseed crops. India is the biggest importer of edible oils and pulses in the world. In 2017-19, 68 per cent of edible oil and 17 per cent of pulses consumed in India were imported. In addition, with the withdrawal of public funding in agricultural research in the global south, big international agri-businesses have acquired monopoly control over the supply of modern inputs for agriculture, including fertilisers and seeds. India's reliance on imports of manufactured fertilisers has steadily increased. In 2020, about 30 per cent of urea supply and 61 per cent of Di-Ammonium Phosphate –DAP – supply in India were met through imports.

Globalisation has not only resulted in increased volatility in food prices, but it has also created the conditions in which millions are vulnerable to short term disruptions and volatility. Low levels of farm incomes, widespread unemployment among rural and urban working classes and shrinking access to social security systems have all contributed to food insecurity and vulnerability.

The current global food crisis must be seen in this background.

Even if we look at the immediate factors that have contributed to the creation of the food crisis, economic sanctions by the EU and NATO seem to be the primary culprit. The use of economic sanctions to specifically target the supply of food and agricultural inputs preceded the Russia-Ukraine war. Since 2020, the EU and the US have progressively imposed restrictive measures against Belarus, the largest producer of potash in the world. In fact, specific sanctions were imposed against Belarus Potash Company and Belaruskali, the two biggest Belarusian exporters of potash. US sanctions on Iran, a major supplier of DAP, also contributed to a contraction in the availability of fertilisers.

NATO's imposition of sanctions against Russia, banning Russia from the SWIFT payment system used by almost all banks, and restrictions on the use of basic maritime services such as marine insurance and port facilities by Russian shipping vessels have all contributed to curtailing the global supply of grain and fertilisers. Even though the purchase of grain, fertiliser and fuel is not covered under the sanctions, the US has arm-twisted much of the global south, including India, to stop buying from Russia, even though the EU continues to use Russian gas and oil.

Supported by NATO, Ukraine has not only shut its ports but mined the sea around Odessa port to prevent the possibility of a Russian attack on Odessa. Although Russia, along with Turkey, has proposed that a corridor be created in the Black Sea to allow food shipments, Ukraine has not accepted the proposal claiming that even this corridor could be used by Russia for an attack.

Fears of scarcity have led several countries to introduce export restrictions. According to IFPRI's Export Restrictions Tracker, a number of countries have imposed restrictions on exports of different food commodities in recent months. These include Indonesia, Malaysia, India, Pakistan, Afghanistan, Iran, Kuwait, Lebanon, Turkey, Egypt, Algeria, Tunisia, Morocco, Ghana, Burkina Faso, Kyrgyzstan, Kazakhstan, Azerbaijan, Russia, Ukraine, Moldova, Kosovo, Serbia, Hungary and Argentina. Many of these countries are major suppliers of important food commodities resulting in a considerable gap between the global supply and demand of cereals, edible oils, pulses and sugar.

Along with this, supply shortages and high inflation of fuel and fertilisers have adversely affected the global food supply. Global prices of DAP in March 2022 were 81 per cent higher than the prices in March last year. In March 2022, global prices of potash were about three times, and the prices of urea were about double the prices in March last year. Fertiliser exports have been restricted by China, South Korea, Kyrgyzstan, Russia and Ukraine. The US has pressured a number of countries to stop buying grain, fuel and fertiliser from Russia. With national food self-sufficiency in the global south compromised because of the neoliberal project, export restrictions on food and agricultural inputs by major suppliers are expected to result in a significant worsening of food insecurity.

High food prices can be highly deceptive. It is commonly believed that farmers are benefiting from high food prices during this crisis. Even farmers are happy about the high prices they are receiving for their crops. In India, public procurement during the rabi season this year has been low because wheat and mustard are fetching good prices in the open market. However, this is an illusion, and we must not make the mistake of thinking that high food prices during such a crisis are good for farmers. Over the last few years, farmers in India have been demanding higher, more remunerative, and assured prices for their produce through a system of statutory minimum support prices and public support. However, farmers are going to be adversely affected when agricultural prices rise as part of generalised food inflation during a global crisis. Why is that so? First, the prices that farmers get for their products are not as high as consumer prices. Secondly, given their neoliberal orientation, governments have not prioritised regulation of input prices to protect farmers against price inflation. In such a situation, an increase in the cost of cultivation eats into the benefit of higher food prices. Finally, given the inequality of ownership of land, a vast majority of farmers in the global south are small producers who are net buyers of food. Inflation affects them even more adversely as they sell their produce cheap and are forced to buy food and other necessities when they are dear.

The key lesson countries need to learn from the current food crisis is that domestic self-sufficiency in the production of staple food is important for large countries. Achieving this requires public investment in agriculture and food systems. Agricultural research and assured supply of key agricultural inputs have to be prioritised by countries. Incentivising farmers to produce key food crops through systems of price regulation, public procurement and input subsidies, and creating robust systems of social protection, including distribution of subsidised food, are critical for food security. Policies that have undermined these priorities must be reversed.