Food reserves and geopolitical events

The Russian invasion of Ukraine shows that geopolitical events are able to have an effect on food supplies that is as devastating as bad harvests and that can appear with even greater suddenness.

The outcome of the invasion is not yet clear, and the impact on food supplies is even less clear. But no one denies that the impact will be considerable. Indeed, the most-read item on BBC News on 7th March was a report by Emma Simpson that the Ukraine war will be ‘catastrophic for global food’. ‘Futures prices’ have already risen sharply, suggesting that there is some expectation that things could get much worse.

An earlier blog discussed an EU podcast on maintaining food security in the light of the pandemic. It certainly reads as a monument to complacency now, with its talk of ensuring efficient just-in-time delivery systems. Unfortunately, it did not pick up on the suggestion that it should introduce buffer stocks as a cushion against problems in the supply chain produced by the pandemic or by any other disaster – such as the one we are now facing.

At the moment Europe is faced with cuts to supply chains caused by war and sanctions. Yet to some extent even the devastation caused by the Russian invasion does no more than make worse a situation that was already fragile. Back in November of last year, for instance, higher gas prices were reducing the availability of fertilisers. The shortage of microchips following the pandemic, which those trying to buy a new car had already noticed in 2021, is now clearly affecting the provision of new farm machinery like tractors.

Hence the devastation brought by the Ukraine war is exacerbating problems that were already there, such as higher transport costs produced by rising energy prices. Now things can only get worse. As fertilisers become scarcer, they will become less affordable. This may mean that they are used less, which will have a knock-on effect on crop yields, perhaps reducing them by 50% – and yields have already been affected by the impact of climate change. Supply lines hit by the pandemic will become more strained as important ports and other connections are closed or damaged due to the war. Ukraine has traditionally been known as the ‘breadbasket of Europe’ (though nowadays its exports are more likely to go to North Africa and Turkey).

In the current fragile and fraught situation, it is hardly surprising that food prices are predicted to escalate in the months ahead (and are already doing so). The need for food reserves has never been greater. They need to be embedded as a permanent element in the fabric of enhanced food and security policies in every country of the world. Food reserves, as this blog has consistently pointed out, provide a way of reducing price volatility, and in the present situation, volatile as it is in so many different ways, any means of introducing a measure of stability should be welcomed.