Food prices around the world are rising like a rocket, due mostly to the effects of the Covid pandemic and now the war in Ukraine.
Russia and Ukraine, respectively the largest and fifth-largest wheat exporters, together account for 29 per cent of international annual sales.
And after several poor harvests, frantic buying during the pandemic and supply-chain issues since, global stocks are 31 per cent below the five-year average.
Wheat prices, which were already 49 per cent above their 2017-21 average in mid-February, have risen by another 30 per cent since the invasion of Ukraine started on February 24th.
Most alarming will be the conflict’s impact on agriculture worldwide. The region is a big supplier of critical fertiliser components. Fertiliser prices had already doubled or tripled, depending on the type, even before the war, owing to rising energy and transport costs and sanctions imposed in 2021 on Belarus, which produces 18 per cent of the world’s potash.
As Russia, which accounts for 20 per cent of global output, finds it harder to export its own potash, prices are sure to rise further. Since four-fifths of the world’s potash is traded internationally, the impact of price spikes will be felt in every agricultural region in the world.
There is no easy fix. The war in Ukraine is already a tragedy. As it ravages the world’s breadbasket, a calamity looms.
As well as the human suffering caused by Russia’s attack on Ukraine, the war is causing global economic impacts, some of which are already being felt in New Zealand.
But Russia’s invasion two weeks ago sent some commodity prices surging, and raised fears of food shortages and further supply chain disruption, which matters for a small trading nation like New Zealand.
With the outbreak of war and implementation of sanctions against Russia, the financial markets are already pricing in the risk of grains being in short supply, and the increased cost of feeding grain to livestock will restrict the global supply of beef, pork and milk and increase prices.
New Zealand farmers primarily breed pasture-fed stock so this will not affect them, but current government policies that are restricting agricultural production under the terms of the Paris Accord will have a huge effect on them.
New Zealand has the ability to be one of the best food producing nations and has the reputation of having the most environmentally sound methods of production around the globe.
We should be taking this opportunity to both help feed the world and to balance our books after the effects of the global Covid 19 pandemic.