Last week we reported that Russia effectively banned exports of ammonium nitrate, the main ingredient in commercial fertilizers fertilizers and a commodity which Russia effectively controls, producing two thirs of the worlds annual needs. We warned that even without the disruption to oil and gas supplies that will inevitably result from the conflict in Ukraine, the loss of fertilizer production alone will result in a food crisis with shortages of staple foods and rocketing prices in shops.
And as if that was not bad enough, today we learned that Hungary - one of Europe's most grain rich nations - in anticipation of vastly reduced crop yields without fertilizers, has announced that it will be banning all grain exports effective immediately.
Expect wheat prices, already at record highs, to promptly double from here in the next few weeks as the world exists in a permanent state of near crisis realizes the extent of the global food crisis that is coming.
Much of the world, particularly the poorer regions exist in a permanent state of near famine with the balance of supply and demand for food always on a knife edge and the conflict between Ukraine and Russia will push the world's hunger crisis closer to catastrophe. The two countries are major producers of wheat, - and Ukraine has traditionally been known as Europe's bread basket. They are also two of the world's major exporters of staple wheat and other staples, and a protracted crisis with prolonged interruptions in supply chains will result in higher food prices for everybody and hit the poor, who can leat afford to absorb higher food costs, hardest of all.
A Gallup data survey offers some insight into the populations most likely to suffer serious consequences from prolonged disruption of supplies: People in countries reliant on wheat from Ukraine or Russia, where large segments of their populations were also struggling to afford food before the war broke out. Many countries on the list, including Egypt, Turkey and Kenya, are also in the throes of political upheaval with civil conflict having broken out in some. These s ituations can only be made worse if large segments of the populations face starvation.
The first to declare a humanitarian crisis is likely to be Turkey, which imports 75% of its wheat from Russia and Ukraine in a normal year, making it the most dependent on supplies from those countries. In 2021, a slim majority of Turks (51%) reported being unable to afford food in the past 12 months. Turkey's vulnerability is exacerbated by economic crisis and high levels of inflation.
In second place for reliance on grain from Ukraine and Russia is Egypt, which received 70% of the country's grain imports from those nations in 2019. More than 40% of Egyptians in 2021 reported being too hard up to buy food at some time in the last 12 months.
Egypt's economy was hit hard by the COVID-19 pandemic, but when final figures are available it could show positive growth for 2020 and 2021. Inflation is high and rising however, and further increases in food prices will quickly cancel out the small gains the Egyptian economy has made.
Kenya obtained just over a third of its wheat imports from Russia and Ukraine in 2019, below the percentages of imports for Turkey and Egypt. However, nearly seven in 10 Kenyans lacked money for food in the last year according to Gallup, substantially higher than in Turkey or Egypt.
It is unclear how long disruptions in the food supply due to the war in Ukraine will last, though world higher wheat prices around the world have already triggered increases in food prices. For the developed world, increased prices for wheat will likely cause many to struggle with increases in food prices, but these populations will continue to cope. In the developing world, where populations already struggle to afford food, they may result in famine and social upheaval.
Disruption of Ukrainian wheat supplies may prove doubly painful for regions already in food crisis such as The Horn Of Africa and Yemen. Ukraine was the second-largest supplier of wheat to the United Nation's World Food Programme (WFP) in 2020 and 2021. Unable to procure wheat from Ukraine, WFP will likely have to purchase the grain from other, more expensive sources and thus have less aid to provide to those at the greatest risk.