Are Global Food Supplies at Risk?
A perfect storm of COVID consequences, energy scarcity, and war is already affecting the world’s food supply.
Since the outbreak of COVID-19 two years ago, the American economy can’t seem to catch a break. At least for the last year, we can chalk much of this up to the bureaucratic incompetence and intellectually bankrupt policies of the Biden administration. But let’s look at just one facet. Food prices in the U.S. have risen 8% in the past 12 months, the largest such increase since 1981. And now, Russia’s invasion of Ukraine is disrupting global food markets even further.
How so? Russia accounts for 19% of the global wheat export market, and Ukraine accounts for 9%. Russia is also the world’s largest manufacturer of fertilizer. These factors point to continued disruption in commodities markets and rising food prices. How bad things will get is unknowable and open to debate.
One school of thought points to a catastrophe, with famine in Middle Eastern and African countries that depend on Russian wheat. Surging wheat costs have already destabilized economies still unsteady from the pandemic.
India, on the other hand, doesn’t need Russian wheat; its own crop accounts for 5% of the global market. But India is vulnerable just the same, because it’s the world’s largest importer of Russian fertilizer. This will, in turn, raise wheat prices even more, as Indian wheat production is more expensive or reduced. Many other fertilizer importers will feel the crunch as well. Try as they might, no one has yet been able to produce robust crop yields on a mass scale without fertilizer.
But famine? Economic collapse? Hardly, say others who call for letting the market work itself out. This approach suggests that consumers will adapt to shortages with short-term substitutes, while other producers gear up to fill the demand. There were comparable isolated dips in global wheat production in the 1990s and as recently as 2018, and market correction soon followed without any countries taking drastic measures.
Suspending the Renewable Fuel Standard to free up grain for food isn’t likely to have an immediate impact on food prices. Nor will increasing the amount of ethanol to relieve pressure on gas prices. These short-term half-solutions would come too late to alleviate the pain we’re now feeling. Frankly, it’s government meddling in the commodities markets that caused food prices to go askew to begin with, and long before Russia invaded Ukraine. In a better world with smarter economic policies, ethanol wouldn’t be mandated. More can be done by helping countries find alternative food sources.
Of course, the big force multiplier is oil. Energy is required at every step of agricultural production, through planting, growing, producing, delivering, storing, and selling. Thus, food prices will continue to rise as long as energy prices do.
Remind us again: Weren’t we energy independent at one time?
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