Russia-Ukraine war hits, world food crisis imminent

The Russian-Ukrainian war has lasted for more than a month, and the global energy market has been greatly affected. Now a deeper crisis is imminent: food shortages.

Wheat, barley and corn from the two warring exporters are hard to get out of the country, and most of the fertilizer is trapped in Russia and Belarus. Since the war broke out last month, wheat prices have risen by 21%, barley by 33% and some fertilizers by 40%.

Misfortunes do not come singly. War only adds fuel to the fire of crisis. In recent years, the new crown pandemic, tight transportation capacity, high energy costs, and one after another natural disasters such as droughts, floods and wildfires have tightened the global food supply and raised prices.

The number of hungry people is increasing. “Ukraine is simply adding to the disaster,” said David M. Beasley, executive director of the World Food Program, a United Nations agency that feeds 125 million people every day. "There has been no precedent since World War II to the extent it is today."

We are witnessing a major battle in the 2020s: brand new means - TikTok-style records, Starlink engagements, the first hypersonic missiles on the battlefield; eternal consequences - blood, starvation, death.

The granary is in a hurry, and the price of food is soaring

"Today, in the world's civilized countries, the rich can afford a meal, but the expenses are not high, and the poor cannot have enough to eat, and even turn to the ditch to die."

Xu Xuan, the founder of Chinese agricultural economics, wrote in his 1934 book "The Problem of Food" that this sentence is still the key to understanding the food crisis under the Russian-Ukrainian war today. The crisis is first manifested in distribution and consumption: for the EU, it means buying a few bagels with higher prices; for some countries in West Asia and Africa, it means starving people to death.

The main source of energy for human beings to maintain life is carbohydrates (especially starch). Therefore, rice, wheat, corn, etc. with starch as the main components are called "staple food", and together with tuber foods such as potatoes and sweet potatoes, they are composed of The lifeline of people in different regions.

According to the United Nations Food and Agriculture Organization (FAO), Russia is the world's largest exporter of wheat, with Ukraine in fifth place. The two countries together account for 19% of global barley supply, 14% of wheat supply and 4% of corn supply, and more than a third of global grain exports. The two countries are also major suppliers of rapeseed, accounting for 52% of the world export market.

Known as the "granary of Europe", Ukraine goes beyond exporting wheat, corn and sunflower oil. Tomatoes, poultry, and processed malt products are popular year-round, as are grapes, apple juice, honey, butter and condensed milk.

After the war broke out, Ukraine banned food exports such as wheat, corn, poultry and sunflower oil. Ukrainian wheat accounted for 19% of the EU's total wheat imports, oilseeds accounted for 13% of its total imports, and corn accounted for half of its total imports, the data showed.

At present, some regions in Spain and Italy have begun to impose purchase restrictions on consumers. For example, in Treviso and Belluno, two cities in the Veneto region that have seen significant hoarding, supermarkets limit each customer to a maximum of two bottles of sunflower oil. In some supermarkets in Tuscany, customers are limited to five 1-liter bottles of sunflower oil and two 1-liter bottles of corn oil.

For the sake of strategic security, the EU has launched the "Farm to Fork" measure in 2020, while energy conservation and emission reduction, while developing its own arable land, and developing agricultural land with a high level of biodiversity characteristics. This measure has to be relaxed now. The big environment no longer allows green agriculture and intensive farming. We can only fill our stomachs first.

The situation of "not having enough food" will first appear in West Asia and Africa. The Black Sea and the Mediterranean Sea are not large, and the food in Eastern Europe goes by sea, and the cost is very low. Moreover, the Middle East and Eastern Europe both rely on wheat as the main food, and they also have the dietary habit of partially replacing the staple food with corn. Last year alone, more than 40% of Ukraine's wheat and corn exports were sold to West Asia and North Africa, which are often plagued by drought.

Russia is sanctioned, making it difficult to export food. At the same time, Ukraine's Black Sea ports have been blocked by Russia and lack sufficient ground transportation for vehicles.

Most of the wheat in Lebanon, Libya, Tunisia and Syria comes from Russia and Ukraine. At the moment, Syria's wheat stocks can only last for two months, and the government has announced cuts in spending and rations. The most important granary in Lebanon was destroyed in the Beirut explosion, and the wheat could only last for one and a half months.

Armenia, Mongolia, Kazakhstan and Eritrea import almost all wheat from Russia and Ukraine. Together with the countries above in West Asia and North Africa, they will compete with larger buyers - including Turkey, Egypt, Bangladesh and Iran, where more than 60 percent of the wheat comes from the two warring countries.

However, all of the above countries can only bid for smaller supplies. Because, as the world's largest wheat producer and consumer, China's purchases this year will be much higher than in previous years. In early March, the Chinese government revealed that last year's severe floods delayed the planting of a third of the wheat crop, and the upcoming harvest was not optimistic.

Wheat in Russia and Ukraine is not so easily substituted. Stocks are tight in the United States and Canada, South American grain producers such as Argentina and Brazil are tightening export controls, and Australia is running at full capacity, according to the United Nations. Wheat prices have risen 69 percent in the past year.

During the Covid-19 pandemic, the number of hungry people worldwide has increased by about 18%, to 720 million to 811 million. In early March, the United Nations said the impact of the war on global food markets alone could starve an additional 10 million people.

In Somalia, in the Horn of Africa, 330,000 children were severely malnourished as of February, and a third of them are life-threatening without additional assistance. The same problem occurs in the Sahel region, which includes Burkina Faso, Chad, Mali, Mauritania and Niger, all of which have suffered from food shortages caused by recent droughts.

Giant's Stealth War

The emergence of food crisis still has to be traced back to "production".

The dominant countries, international financial giants, world food giants, food industry giants, multinational supermarkets, and the World Trade Organization, the World Bank, and the International Monetary Fund are intertwined, actively or passively constitute the inherent crisis of the food industry.

In 1946, there was a food shortage in Europe. At the time, the United States and Canada had enough food to provide citizens with 3,000 calories a day, and while the queues outside London grain stores lined a few streets, the British ate 2,900 calories a day. In continental Europe, the number is 2,000. Food aid from the United States was halted in 1954 as European farmers finally became self-sufficient. Since then, U.S. food aid has been directed to countries in the Global South, whose farmers simply cannot make any political demands of the U.S. like European farmers.

It was also a time of great McCarthyism. US President Eisenhower signed the "Agricultural Trade Development and Assistance Act", the use of food as a political bargaining chip. As long as a state-owned workers' organization or a suspected left-wing opposition is found, the strategic grain reserve can be used to "send warmth". In the late 1960s, 79% of U.S. grain exports went to third-world countries, because "as long as you give the hungry people some bread, they will obey."

The shock of oil prices and the application of Green Revolution technology have made third world countries try to reverse the "handouts" of the great powers, but a more subtle control system over the food system is also taking shape. The countries of the global south have just experienced the oil crisis and can only buy oil on credit from the oil exporting countries. The economic recession and the high debt and national debt have forced them to borrow more. The World Bank "stepped up" and proposed a "structural adjustment plan" to the debtor countries - to continue borrowing, there are several conditions.

The World Bank's loan supplement program has profoundly transformed the economic structure of the global South: the country's government cannot run a deficit; the currency is allowed to circulate freely internationally; trade is liberalized and tariffs are reduced. These approaches essentially leave the initiative of debtor countries entirely in the hands of creditor countries. By comparison, it can be seen that none of the developed countries "developed" through such means. The United States, the United Kingdom, Japan, Germany and other industrial powerhouses shelter important industries under tariffs, and at the same time borrow from the public to increase size of the public sector.

For southern countries that owe a lot of dollar debts, the most direct way to obtain dollars is to export goods to dollar countries. The most readily available way is to use the country's existing resources and land to export agricultural products. Compared with the "old-fashioned" and bloody colonial plundering in the past, the cheaper and freer "market mechanism" has allowed the northern countries of the world to accept the cheap food from the southern countries "magnificently", and every bite of the former is in the Help the latter pay off the debt.

The World Trade Organization, established in the 1990s, incorporated agricultural provisions. After careful design, farmers in the EU and the United States can continue to receive subsidies, the relationship between the government and enterprises is not affected, and in other countries, the government must not interfere in the operation of any agricultural enterprise.

The role of large enterprises is often greater than that of countries. 70% of the world's wheat is controlled by six agricultural companies. 98% of the bagged tea trade is controlled by one company. Four multinational grain companies, ADM, Bunge, Cargill and Louis Dreyfus of France, also known as "ABCD" according to their English initials, control the absolute pricing power of grain.

The four major grain merchants have been established for more than 100 years. They have a skilled capital operation model and adopt a closed-loop control over all aspects of grain planting, production and sales. At present, 80% of the world's grain trading volume is monopolized in the hands of these four major grain merchants. They go long and short, buy low and sell high. They can also lobby the government to direct farmers to plant certain crops to meet the "national interests".

There are many "players" in international food politics. However, the peasants who are always hungry and hope to stop being hungry have little to do with this game. The production of food is not to give opportunities to the poor, but to "cleanly" squeeze the poor out through a series of complex operations by the rich.

man in hourglass

The ultimate goal of the food issue is fair distribution, so that everyone can eat well and eat well. At the current level of productivity, it is not difficult to achieve this goal. The reality is that hundreds of millions of people go hungry.

The grain industry is hourglass shaped. The upper end of the hourglass is the huge consumer, the lower end is the huge farmer, and the thin bottleneck part in the middle is the communication channel between the producer and the consumer - the grain enterprise. This "middleman" gets the most, but doesn't necessarily convey the truth. Now that food prices are rising, farmers are not necessarily benefiting. Agricultural products are not industrial products, and the output of the assembly line can be controlled by pressing a button. Grain crops have a long production cycle and slow transformation, and farmers have poor risk tolerance. If they fully follow market signals, they are likely to go bankrupt.

The "Modern Commodity Futures Trading Act" signed by US President Clinton has opened up a new gold rush for financial companies - grain futures. Grain is traded in a portfolio of commodity futures, and a variety of agricultural products enter the Goldman Sachs Commodity Index. Commodity indices tie food prices to oil prices through a series of financial instruments built by investors that have little to do with the food itself. In the 2008 economic crisis, the oil price bubble burst, and hot money was transferred to food.

Did speculators push up food prices? Economists have a lot of debate. Anyway, according to the economic model, every kind of profit has its justification, and every kind of successful transaction is inevitably accompanied by a failed transaction. The theory is valid - for every trader who drives a Bugatti, his opponent must lose only a pair of underwear.

Government and public fascination with green concepts such as "biofuels" has also contributed to a spike in food prices. In this industry, crops are not for food, but for fire. Corn and sugar cane are processed into ethanol. Legislation and subsidies passed by the European Union and the United States have stimulated enthusiasm among farmers around the world to plant corn, which is almost like digging for oil.

The energy market is in short supply, and the land that has been converted into a fuel base has further pushed up the price of corn and other grains grown on it. The truth is that more energy is required to produce diesel than to burn diesel. Biofuels, as well as new energy vehicles, energy input and output, to some extent, are in line with this fact. In any case, during the 2008 U.S. election, an open claim was that corn-based ethanol was much better than Arabian oil.

Population growth is one reason for the rise in food prices. The fundamental question that cannot be avoided from the food problem is Malthus's theory of population. Adam Smith studied how countries got rich, so Malthus studied how countries got poor. Population theory will continue to work in Africa.

Fertility rates are above 4% across the continent and above 5% in most countries. Other countries coveted the land of Africa. The United States established a U.S. Africa Command to protect resource interests. Some private companies in Asia, such as South Korea's Daewoo, have taken 1.3 million hectares of land in Madagascar to grow food to meet the needs of the Korean market. Land is free, and Daewoo's "gift" to Madagascar is to hire locals to farm the land. Land and food do not belong to those who need food most on this land.

Meanwhile, consumers in San Francisco don't want "Happy Meals" anymore. After being hypnotized by the marketing conundrum of the fast food industry for decades, 2.3 billion adults in the world are obese , and people gradually realize that it is not the people who eat what they eat.

The international food system shapes lives in which those who eat do not eat healthily, and many more do not. Its own industrialized production methods are also responsible for climate change, ecosystem degradation, and devastating pollution. Some people want to solve the problem "one hundred and one hundred", and if there is no food on land, they turn to the sea.

However, research shows that according to the current industrial fishing and consumption habits, by 2048, there will be no fish that can be eaten by a boat in the sea.