FAO’s Maximo Torero Cullen explains how global food supply difficulties could turn into a real disaster
Due to high natural gas prices, rising food prices could mean the difference between life or death for millions of people around the world. Organizations such as the Food and Agriculture Organization of the United Nations (FAO) are closely monitoring the effects of price increases on global food security.
In an interview with F&D’s Bruce Edwards, FAO chief economist Maximo Torero Cullen said wheat and fertilizer supply shortages have driven up prices and increased food import bills for more than 25 billion most vulnerable countries, putting 1.7 billion people at risk of going hungry.
F&D: We know that the war in Ukraine is affecting the food supply in some parts of the world. What other factors are at play?
CMT: The main driver of the food price issues we face is conflict; most countries in food crisis have internal conflicts. The second is economic downturns; COVID-19 is one of the main reasons why most poor countries face significant challenges. And the third, of course, is climate change.
The war in Ukraine has exacerbated the problem, as it has halted exports from two major grain exporters: Ukraine and Russia. About 50 countries depend on these two exporters for at least 30 percent of their grain imports. For about 20 of these countries, it is more than 50%.
Another factor is that Russia is the world’s leading exporter of nitrogen, the second of potassium and the third of phosphorus fertilizers. When he stopped fertilizer exports, it drove up prices – which were already high before the war – creating a significant problem for farmers.
The impact on food-importing countries is therefore twofold: they face a higher food import bill and a higher cost of fertilizers. This is our major concern today. Because the cost of fertilizers has in some cases quadrupled, many farmers can no longer afford them, which will affect the harvest this year and next year.
F&D: What is the impact on vulnerable economies?
CMT: In the case of Africa, the main net importers of food products are the countries of North Africa: more than 50% of their wheat imports come from Russia and Ukraine. Sub-Saharan Africa is different because it does not have wheat as a staple food. They have cassava and rice. However, corn and wheat are used as raw materials.
In the world’s 62 most vulnerable countries, there is talk of an increase of about $25.4 billion in the food import bill compared to last year. And it affects 1.7 billion people.
F&D: What are your main concerns if the war in Ukraine continues?
CMT: If the war continues, in 2022 and 2023 we could potentially have a food access problem coupled with a food availability problem, as Ukraine and Russia would significantly reduce their exports, including fertilizers. This is a situation we must avoid. Under current conditions, we estimate that Ukraine could reduce its wheat and maize exports by around 40%, and that Russia could do something similar.
We also observe that due to the increase in the cost of fertilizers, rice production has been affected for next year and prices are starting to rise. Additionally, a poor monsoon season potentially affects rice plantings in India. These developments pose risks because rice is an essential staple food in the world, including in sub-Saharan Africa.
If I had my say on which countries should have access to fertilizer, major rice exporters would be a priority, as they will provide the rice we need to minimize food access issues next year. .
F&D: Your research shows that conflict accounts for 72% of the increase in food insecurity since 2016. How do you ensure that countries in conflict have access to food?
CMT: Countries in conflict are the most vulnerable because they are net importers of food products, in addition to having balance of payments problems. We are proposing a food import financing facility, which we hope the IMF will make operational. Why is this so critical? Because it’s a problem that affects 1.7 billion people.
What we observe in these countries in conflict is, first, that they do not import what they need. Second, some are importing low-calorie foods, which could create significant problems. Third, they don’t have access to finance because they are already too indebted. I am referring to Afghanistan, Burkina Faso, Burundi, Central African Republic, Democratic People’s Republic of Korea, Eritrea, Ethiopia, Gambia, Guinea, Liberia, Mali, Mozambique, Niger, Rwanda, Sierra Leone, Somalia, South Sudan, Sudan, Syria, Togo and Yemen.
We believe that a food import financing facility could help support these countries immediately by supplementing their balance of payments, so that they can import what they need this year and minimize the risk of social unrest, which could worsen the situation. They can then repay the cost of the import shortfall, which amounts to $24.6 billion.
F&D: What are countries doing that could make the situation worse?
CMT: Since these products are concentrated in major exporting countries, export restrictions are extremely harmful. More than 20 countries imposed export restrictions at the end of July, and 17% of calories are subject to trade restrictions. The duration of this level of export restriction is longer than what we had in 2007-08, when trade restricted calories were 16%.
If we have shortages of rice, many countries will start imposing export restrictions, and it will only make things worse.
F&D: Given the heavy reliance on rain-fed agriculture in food-crisis regions, what would it take to help producers find alternative ways to increase agricultural production?
CMT: Climate change has two potential impacts. One is extreme situations, like droughts or floods, and the other is variability. What we can do with farmers is to increase their resilience. One way is to insure them. In developed countries, agricultural insurance is heavily subsidized. Poor countries, on the other hand, do not have the resources to provide this level of subsidy or adequate information to insurance companies to properly calculate losses.
We need innovative mechanisms to help insurance companies reduce their costs. For example, Mexico has started implementing weather index insurance, initially with a large subsidy. Now the companies compete with each other and the subsidy has been reduced to a minimum. Additionally, understanding the science — for example, knowing which seeds are the most weather-resistant — will help farmers determine what to plant to avoid crop loss.
F&D: How to prevent the current crisis from turning into a real global humanitarian catastrophe?
CMT: I wouldn’t say we’re in a food crisis right now. I think we have a very serious problem with access to food. If things get worse and we have a problem with access to food and food availability, then we will be in a very bad situation.
We recommend, of course, continued support for the humanitarian response. But we must link this to the provision of inputs and cash to maintain critical production systems and support supply chains in countries in deep emergency, including Ukraine.
For the whole system, the first urgent step is to help countries close the gap in the food import bill. Next, we need to accelerate the process of efficiencies. We have to keep trade open; the level of export restrictions we currently have is extremely risky. We need to increase the transparency of information, and that is where our Agricultural Market Information System comes into play. Next, we need to increase the efficiency of fertilizer use.
We also need to identify where the new hotspots of food insecurity are so that social protection programs can be retargeted to be more effective and efficient.
This interview has been edited for length and clarity.
Opinions expressed in articles and other materials are those of the authors; they do not necessarily reflect IMF policy.