by Kari Grenade, PhD Regional Economist and Macroeconomic Advisor
Global food supplies are declining, prices are soaring and risks of a global food crisis are rising.
Indeed, the pillars of the global food system are being severely shaken as a consequence of an unprecedented convergence of disruptions caused by supply chain challenges, climatic events, and Russia’s invasion of Ukraine.
The Russia-Ukraine region is a major global food supply hub. According to world-grain.com, the region is responsible for about 30% of global export of wheat and 65% of sunflower. McKinsey & Company reports that around 75% of global sunflower oil exports have been lost due to the Russia-Ukraine war. International food experts paint a grim picture of the situation, citing that global wheat inventories are at alarmingly low levels; currently about 10 weeks of global consumption. Global inventories of corn and other grains are also at historic lows (www.world-grain.com). Some global experts opine that the current global conditions pertaining to food shortages and high prices are worse than those experienced in 2007 and 2008.
Global fertiliser prices are also increasing amid supply shortages occasioned by the Russia-Ukraine war, which is hampering supplies of natural gas, a key ingredient in fertiliser. Russia and Belarus control about 40% of the world’s supply of potash, which is used to produce fertiliser; invariably, any disruptions of supplies will affect global prices. According to the World Bank, global fertiliser prices surged by nearly 30% since the start of 2022, following the 80% increase in 2021.
There is also a global shortage of semiconductor chips — a key component required in the production of all modern farm equipment. Ukraine produces half the world’s neon, a critical component of semiconductor chips, and nearly all of that production has been cut off according to international analysts. Moreover, bans of certain commodity exports by some countries are keeping food prices high and supplies low. The International Monetary Fund reports that since the war in Ukraine started, close to 30 countries worldwide have restricted trade in food, energy, and other key commodities.
Surging fertiliser prices and acute shortages of semiconductor chips (particularly those used in making farm equipment) increase risks of lower crop yields in major breadbasket regions of the world, thereby heightening global food insecurities and prolonging global inflation. Gro Intelligence estimates that an additional 400 million people have already been made food insecure. For sure, the Russia-Ukraine war has shifted global patterns of trade, production, and consumption of commodities in ways that might keep prices high and food supplies low for years.
The implications of all of this for the Caribbean are immense. It is heartening that Caricom seems to be preparing for the impact of the emerging food crisis. Caricom Agri-Food Investment Forum and Expo was held on 19 – 21 May 2022 in Georgetown, Guyana, under the theme: “Investing in Vision 25 by 2025”. “Vision 25 by 2025” sets a goal of reducing regional food imports by 25% by 2025, through accelerated and targeted investments in agriculture and food production within Caricom member states. Caricom’s food import bill is currently estimated at 6 billion US dollars by the Caricom Secretariat. The Expo brought together stakeholders along the agri-food value chain including policymakers, development partners, foreign and local private investors, farmers and distributors to dialogue on how investments in agricultural and food production could be encouraged, scaled up and accelerated. The President of Guyana called for all “hands on deck” to realise “Vision 25 by 2025” and listed several important areas, including financing, technology, partnership, shared responsibilities and the inclusion of women and youths to bolster regional agricultural and food production and to make it globally competitive. In sum, the Guyanese President emphasised the “urgency of producing more food within the region.”
In the final analysis, all is not entirely gloom and doom. The unprecedented global food and commodity price shocks have the potential to change production and consumption patterns in the Caribbean in beneficial ways. Therefore, Caricom needs to vigorously pursue “Vision 25 by 2025” through deliberate policies and concrete actions including among others:
- expanding arable lands
- incentivising the creation of cooperatives to strengthen efforts in communal production, processing and marketing
- enabling a cooperative financial system as a source of affordable financial services for the farmers and producers
- investing in agriculture-related research to increase agricultural value-added and productivity
- adopting multi-crop cultivations and crop rotation
- supporting the up-scaling of composting
- protecting and promoting seed and plant varieties that are resilient to pest damages and impacts of climate changes
- supporting the widespread use of technology throughout the agricultural sector and value chain
- ramping up investment in energy efficiency and renewable energy; and
- addressing (systematically and comprehensively) the scourge of praedial larceny