Issue link: https://maltatoday.uberflip.com/i/1491498
2.2.2023 11 OPINION Why there will still be plenty of pressure on food prices this year John Hammond & Yiorgos Gadanakis John Hammond is Professor of Crop Science, University of Reading Yiorgos Gadanakis is Associate Professor of Agricultural Business Management, University of Reading S hortly aer Russia invaded Ukraine, the closely watched food price index of the UN Food and Agriculture Organization (FAO) reached its highest recorded level, stoking con- sumer prices across the world. In the UK, for example, the prices of many everyday items increased way ahead of inflation, with bread and eggs both up 18% in the year to December, and milk up 30%. Such rises threatened food security, particularly in low and middle-income countries that rely heavily on Ukraine and Russia for grains and plant oils. at included many countries in Africa and Asia, which took 95% of Ukraine's wheat exports in 2021 (roughly a tenth of the world supply). is prompted much talk in the media about the potential for famine. Yet nearly a year after the invasion, the FAO food price index has returned to pre-invasion levels. So why has pressure on prices reduced, and what are the prospects for the year ahead? What happened in practice You can't look at food in isolation from COVID. Many people in the energy and food industries were either too ill to work or prevented from doing so because of pandemic restrictions, which squeezed supplies. When the world opened up and demand began to rise, food and energy prices went up too. is made people particularly vulnera- ble to events in Ukraine. Once the war began, food-price inflation peaked be- cause the markets were uncertain about whether production and exports would be hit, and how global supply chains would adapt. Ukraine's grain exports resumed after a UN deal was brokered in July to cre- ate a humanitarian corridor through the Black Sea. It also helped that the wheat harvest was larger than expected, even if large areas around the front line remain unharvested. Much of Ukraine's corn has not been harvested either, for the additional rea- son that the drying process is energy in- tensive and farmers struggled to afford the raised prices. Overall, Ukraine's grain exports were down in 2022 by about 30% year on year. Russia is normally an even bigger ex- porter of wheat than Ukraine, supplying about 15% of world demand. It's hard- er to see what has happened to these supplies because the Russians stopped providing data, but certainly Moscow's policy of only dealing with "friendly" countries will have affected availability for many countries too. Countries that rely heavily on Ukrain- ian/Russian grains have been forced to shop elsewhere. For example Yemen and Egypt have imported more grain from India and the EU, paying higher prices than usual. Several additional pressures on farmers have further squeezed the global food supply. Fertiliser prices have rocketed in the past two years. Russia, an important global supplier, has been stockpiling for domestic use. Elsewhere, heightened en- ergy prices have squeezed output. In the UK, the largest nitrogen-fertiliser facility suspended production during 2022. Av- erage fertiliser prices for UK farmers are now 18% higher than the winter before the Ukraine invasion, and 66% higher than two years ago. Extreme weather in summer 2022 was another problem, including heatwaves and drought in northern Europe, Amer- ica and China, flooding in Pakistan and drought in Argentina. Irrigation has become more difficult in areas that depend on it, while in Europe drought conditions have reduced the supply of crops for animal feed and har- vest of grass for silage. Meat and vegeta- ble prices have both gone up as a result. According to the UN's World Food Programme, the overall effect of infla- tion, war and extreme weather has been that many people around the world have had their access to food restricted. e number of people facing severe food in- security is up 20% since the war began. The outlook Wholesale gas and oil prices have at least declined from their 2022 highs, which will benefit the entire food supply chain. is is one reason why inflation eased slightly in the autumn in many countries. is will have taken some of the heat out of the global food price index. Ce- reals, meats and particularly vegetable oil prices all fell towards the end of the year, though sugar and dairy prices went in the opposite direction. Overall food price inflation remains historically high. For the year ahead, the area of crops planted in Ukraine is estimated to be 17% down on 2022. Farmers in other countries are planting more wheat and maize to compensate, though the overall supply will still be pressured by higher farming costs and potentially more ex- treme weather. Fertiliser prices will probably stay high as supplies remain restricted. Farmers in wealthier countries may keep apply- ing normal quantities to their crops, like on previous periods of raised prices. But in poorer countries they may cut back, threatening yields and quality and expos- ing smallholder communities to greater food insecurity. In sum, many staples will likely re- main in tight supply in 2023, meaning price pressures continue. Retailers will be forced to either absorb the costs or pass them on to consumers. Govern- ments will have to consider how to both support struggling consumers but also farmers to maximise what they produce. At the international level, there needs to be an urgent fertiliser supply agree- ment to minimise disruptions, prioritis- ing access for vulnerable communities in developing countries. Longer term, farming needs to reduce its dependency on fertilisers by developing agricultur- al practices that optimise the cycling of nutrients. is includes more efficient use of manures and extracting nutrients from sewage, and using more legume crops in rotations to take advantage of the fact that they enhance nutrients in the soil. ere also needs to be more precision farming techniques to target resources within fields to where they will be used most efficiently. ese practices are well adopted in western countries, but other parts of the world lag behind – particularly devel- oping countries. Fertilisers will always be part of the farming system, but we'll make food production more sustainable if we can get these things right.