World Grain - May 2022 - 10

NEWS REVIEW
Ukraine war to have lasting impact
on food inflation, supply chain
ARLINGTON, VIRGINIA, US - As the war continues in
Ukraine, the impact on global agriculture will have prolonged
affects, including food inflation, limited fertilizer supplies,
a European recession and fundamental changes in supply
chains.
" There's a lot that we are not talking about in terms of the
overall issues that can come from the Ukrainian-Russian
conflict, particularly if it extends over a year, two or three, "
said Richard Kottmeyer with FTI Consulting, Inc., during
a webinar April 14 hosted by the American Feed Industry
Association (AFIA).
The conflict adds another layer to existing pressure on the
agriculture industry from the COVID-19 pandemic and the
EU's Farm to Fork Strategy, which aims to reduce the environmental
and climate impact of production.
Food inflation is likely to hit levels not seen in 20 plus
years, Kottmeyer said.
" If the war ended today, we would have food inflation widely
for three years, " he said. " That's significant. As the war
continues, food inflation and the number of years continues
to get worse. "
Commodity prices will continue to climb, Kottmeyer explained,
with some models showing corn rising above $12
a bushel.
" I'm not saying it's a likely scenario, but the question is are
you prepared if it becomes the scenario? " Kottmeyer asked.
With the food inflation that currently exists and the likelihood
it will get worse, there is severe pressure on fundamental
stability in northern and west Africa, he said.
" The Ukrainian conflict is likely to lead to other conflicts
within the next 24 months, " Kottmeyer said. " That could put
severe pressure on any number of specialty commodities, and
agriculture trade in general. "
The problem compounds further if there is another COVID
outbreak, or another problem to top the ones that already exist,
he said.
" There is going to be a fight for supply, for inputs, for
wheat, for food, between energy and grains, " Kottmeyer said.
" There isn't a model I see where someone is not a loser. The
question is who loses and what do they lose? How are we
going to define who is harmed by the scarcity? Without that
definition, it's going to be developing countries and we're going
to go from one conflict to more conflicts. "
It is possible China could step in with wheat or other commodities
to provide food security for Africa and other countries
that are most at risk, he said.
" That creates all kinds of geopolitical questions in terms of
what is the cost, " Kottmeyer said. " What are the loyalty and
geopolitical changes if China takes food security on its Belt
and Road Initiative 2.0. "
Infrastructure was already in chaos in part because of
COVID, and now it's worse. It's likely ports in the Black Sea
are going to be Russian or split, Kottmeyer said.
" Supply chains fundamentally are going to have to change, "
he said. " What happens with labor? Labor is a critical issue
and we have a lot of negotiations going on right now. "
Recession is likely in the EU, with the possibility of losing
3% to 4% in terms of GDP in the region. Fertilizer accessibility
also will be an issue with 50% of the Black Sea region's
potash not shipped.
" It looks like Russia and Belarus are limiting shipment and
production, " Kottmeyer said. " With limited supply, Europe
is unlikely to get allocations. India may be the most at risk
for lack of fertilizer because they are some of the earliest
to plant. "
There are also significant direct, physical disruptions in
the region, explained Roland Fumasi, RaboResearch Food &
Agribusiness, including the ability to produce crops in Ukraine
right now and moving that production out of the region.
Disruptions include land mines in agriculture fields and
a labor shortage as people move away from agriculture to
defend their country. Fumasi said they estimate 50% of
Ukrainian wheat production is in heavy conflict zone and 25%
of corn production.
" It's a big challenge right now in terms of getting a crop
planted, " he said. " Even if we assume that Russia and Ukraine
get some crop planted and harvested, we have a major logistical
challenge. "
The United States could increase exports of corn and wheat
by 200 million bushels each, Fumasi said. But that would only
make up 10% of the shortfall in wheat and about 17% of the
corn shortfall.
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May 2022 / World Grain / www.World-Grain.com
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World Grain - May 2022

Table of Contents for the Digital Edition of World Grain - May 2022

World Grain - May 2022 - Intro
World Grain - May 2022 - 1
World Grain - May 2022 - 2
World Grain - May 2022 - 3
World Grain - May 2022 - 4
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https://digital.world-grain.com/sosland/wg/world-grain-march-2024
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https://digital.world-grain.com/sosland/wg/world-grain-december-2023
https://digital.world-grain.com/sosland/wg/world-grain-november-2023
https://digital.world-grain.com/sosland/wg/world-grain-october-2023
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https://digital.world-grain.com/sosland/wg/world-grain-october-2022
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