Russia’s Invasion of Ukraine Threatens Further Hikes in Food Prices

Even before Russia invaded Ukraine, food prices were spiking around the world because of supply chain disruptions. A combination of always unpredictable nature, bad policy, and busted supply chains (also largely from policy decisions) hiked the cost of fertilizer for farmers. That threatened agricultural output even as pandemic-era economic disruptions impoverished many people. Now, war further threatens the cultivation of grain and the ability to put affordable meals on many tables. A year that already looked hungry may prove grimmer than expected.

“In a year when the world is already facing an unprecedented level of hunger, it’s just tragic to see hunger raising its head in what has long been the breadbasket of Europe,” David Beasley, executive director of the United Nations World Food Programme, commented last week. “The bullets and bombs in Ukraine could take the global hunger crisis to levels beyond anything we’ve seen before.”

The immediate crisis is for the residents of Ukraine, whose lives have been disrupted or destroyed by the invasion of their country. As of March 8, an estimated 2 million refugees had sought refuge in neighboring nations. The millions remaining face combat, privation, and the suspension of normal life. For the world beyond, one important concern is that normal life in Ukraine includes growing massive quantities of grain eaten or fed to livestock elsewhere.

Ukraine exports roughly 7 percent of the world’s wheat, according to MIT’s Observatory of Economic Complexity (other sources have slightly different percentages). The country’s farmers also produce 13 percent of all exported corn. Neighboring Russia, which invaded Ukraine and is now subject to economic sanctions as a result, exports 18 percent of the world’s wheat and about 2 percent of corn. Some grain might make it to the global marketplace despite the war, but sanctions, ruined crops, and threats to shipping will dramatically reduce the supply. 

Months before the war began, prices for chemicals needed for producing fertilizer had already soared, increasing the cost of raising crops. That was, in part, a result of international demand for natural gas, from which ammonia is sourced to produce nitrogen-rich urea. Disputes over trade policy helped create shortages of other fertilizer inputs.

“In addition to being one of the largest producers of wheat, Russia has enormous resources in terms of nutrients,” warns Svein Tore Holsether, president and CEO of fertilizer giant Yara International. “Plants need nitrogen, phosphate, and potash to grow.…In total, 25% of European supply of these three nutrients come from Russia.”

Russia recently cut the export of those nutrients to guarantee domestic supply and, probably, to retaliate against nations imposing economic sanctions. That means more trouble for fertilizer production and higher costs for farmers as well as the people they feed. Holsether had predicted a looming “food crisis” long before Russian tanks crossed Ukraine’s borders as result of fertilizer costs. Now, he adds that “a world with unstable food supply is a world with famine in parts of the world, increased mortality, armed conflict, migration, riots, and destabilized societies which can further accelerate geopolitical tensions.”

Once again,