More and more people are starving all over the world – and this sad fact is aggravated considerably by the Ukraine war. The granary of Europe still has enough grain in stock. The problem is getting the wheat out of the country. According to experts, a rethinking of global agriculture must soon take place so that the world does not just swing from crisis to crisis.
The UN’s World Food Program recently announced that 193 million people worldwide are suffering from acute hunger. Never before have more people been directly threatened in their mere existence by their nutritional situation.
The big problem with this number is that it dates from 2021. In view of the crises that the new year brought with it, it is to be feared that this sad record will be surpassed again. Because food has never been more expensive and therefore unaffordable for the poorest part of humanity. The price increase in one of the staple foods par excellence weighs particularly heavily: wheat.
“40 percent of the calories consumed worldwide come from wheat, corn and rice,” explains spokesman Martin Rentsch from the World Food Program (WFP). If prices rise – or rather, jump – as they are at the moment, a large part of humanity will feel it. The WFP itself is also struggling with inflation. Each month, the program has to spend $71 million more on logistics and purchasing. This money could provide four million people with a daily ration for a month.
The price of wheat, which is so important, is currently increasing enormously. India’s announcement that it would largely ban wheat exports pushed the price on the Euronext exchange to an all-time high of 435 euros per ton. Futures market data from the USA, on the other hand, shows in which direction market participants believe the price will move – even further up. Investors have been speculating on this for some time.
“The example of the wheat price shows that institutional investors were already increasingly opening long positions at the end of 2020 and thus contributed to breaking the technical resistance upwards,” says Christian Henke, analyst at Broker IG. The outbreak of the Ukraine war accelerated this price trend.
The so-called “commercials”, i.e. futures market participants who really need the raw material, are now positioned “long” – “but not from a speculative point of view, but in particular to purchase wheat for production”, says Henke, and adds: “The increased Prices are passed on to the end user – with the result that the spiral of inflation turns faster.”
The market participants could not come to any other conclusion. On the one hand, there is India’s export ban. After a record heat wave, the country wants to guarantee its own security of supply. The surprising thing is that although India is a large producer, it is not particularly important as an exporter.
According to the financial news agency Bloomberg, however, this shows how strained the world market already is. “If this ban had come in a normal year, the effect would have been minimal, but the loss of Ukrainian [export] volumes is compounding the problems,” an analyst told Bloomberg.
India was considered to be the supplier who could cushion the loss of supplies from the Black Sea region. It’s not as if all of Ukraine’s arable land has been destroyed yet, although according to US Department of Agriculture (USDA) data, the most productive areas are near the front lines in the east of the country.
In fact, the country’s farmers are trying to keep the farm going – if necessary with helmets and protective vests. But production is not the biggest bottleneck for Ukraine, on whose wheat experts countries like Egypt, Tunisia and Morocco depend. The more serious problem is that the existing reserves simply cannot find a way out of the country. Because important Black Sea ports such as Odessa are blocked by Russia’s fleet. This keeps driving prices up in world trade.
Time is of the essence. Because in less than two months the wheat harvest season will start in Ukraine – by then the silos have to be empty, on the one hand so that the fresh grain has space, but on the other hand so that the farmers in Ukraine can use the income to cover the costs of the harvest and can finance the new sowing.
The European Union is already working on getting more than 20 million tons of grain out of the country via other routes, such as transport trains. But here, too, the logistics are reaching their limits. Because Ukraine and the EU have different rail standards, the grain has to be transhipped at the border. That’s why exports are faltering. According to the EU, the waiting time for thousands of wagons at the border is already 16 days on average – in some cases even more than 30 days.
However, this also raises the question of why EU countries are not directly trying to compensate for the loss with their own additional production. In fact, according to USDA data, the bloc is the largest wheat producer in the world.
But it’s not that easy, says agricultural economist Matin Qaim to FOCUS Online. “All countries and regions should operate as productively as possible in order to at least partially compensate for bottlenecks, but you cannot simply ramp up production at will. Land, water and fertilizers are scarce.”
On the other hand, wheat is not just wheat. “Only 20 percent of the wheat grown in Germany is bread wheat, the rest mostly ends up in the feeding troughs of animal husbandry or is processed into biofuel,” explains Francisco Mari, world food officer at “Brot für die Welt”. The situation is similar in other G7 countries such as France. Only in Russia and Ukraine is it different.
That in turn does not mean that the world, even individual consumers, are completely powerless in the face of such food crises. “Any individual decision that has the effect of dampening both price and volume crises would make sense,” says Mari. That would mean, for example, buying domestic cooking oil such as rapeseed or olive oil instead of sunflower oil, so that the little sunflower oil from Ukraine can be exported to regions that need it more urgently. You could also do without meat. Beef in particular has an extremely poor feed/yield ratio, says Mari.
WFP spokesman Rentsch takes a similar view: “Hoarding sunflower oil now, or 25 packs of flour that cannot be used anyway, does not help the market stabilize.” Another measure that Mari and agricultural economist Matin advocate would be to restrict the use of grain as biofuel.
In the future, the experts agree, but change will be needed. Otherwise there is a risk of further, apparently regional, crises posing a risk to world food security. “We urgently need new agricultural technologies in order to secure global food security in the long term and not just keep swinging from one crisis to the next,” demands Matin, adding: “It is always the poorest of the poor who suffer most from all the crises.”
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Paradoxical at first glance, but it would also be expedient to use less, and not more, wheat. “The world is largely dependent on just three crops [wheat, corn, rice], and that’s in the hands of a few countries and companies,” says Rentsch. The poorer south in particular is dependent on cheap wheat imports – with the result that agriculture in these countries is no longer able to feed its own population.
Instead, farmers there only grow coffee and cocoa for export – products that then end up in the supermarkets of the industrialized countries. “Such connections should also be reconsidered,” warns Rentsch. Without this export orientation, areas would be free there for domestic staple foods.
At the same time, expert Mari believes, Europe must stop showering poorer countries with cheap food in normal times. Then it would be possible for farmers in Africa, for example, to grow millet again, which previously covered the demand there. However, their cultivation disappeared with the wheat glut from the north, says Mari: “We created these crises ourselves with subsidies in the agricultural sector. Until cheap wheat arrived in Africa, no bread was eaten there.”