A food crisis in Europe soon?

The hot war between Russia and Ukraine has already hit international grain prices. The two neighboring countries account for 29 percent of global wheat exports. Together they export 60 million tons of grain annually. In addition, Ukraine is one of the largest exporters of barley, corn and rapeseed and owns a third of the available “black earth”. This is considered to be the best soil in the world. In short: The most productive fields are in the Ukraine, the “granary of Europe”.

Annually in Ukraine more than 60 million tons of grain are produced. More than half is exported. Overall, the agricultural sector plays an important economic role, accounting for 18 percent of gross domestic product (GDP) and 42 percent of total exports. In 2021 alone, the country earned 12,3 billion US dollars from grain exports. When it comes to wheat, Ukraine competes directly with Russia for nearby markets such as Egypt and Turkey.

The main channel for international grain shipments from Russia and Ukraine is the Black Sea. The inland sea between Asia Minor and south-eastern Europe with the neighboring states of Ukraine, Russia, Georgia, Turkey, Bulgaria and Romania has already become another theater of war.

It was from here that the Russian Black Sea Fleet bombed the port city of Odessa on February 22, 2022, on the first day of the war. A possible disruption or even interruption of grain exports from the Black Sea region via this main channel, could lead to consequences that would be devastating: In extreme cases, deliveries of up to 16 million tons of wheat from Russia and Ukraine could be affected. Experts already consider supply bottlenecks to be possible in the coming weeks.

Further dramatic increases in wheat prices, which are to be expected, would not only cause food inflation to rise sharply, but would also trigger a food crisis in Europe, the Middle East and the rest of the world.

We are already living in a time in which food insecurity has increased due to the manufactured Corona pandemic with government-imposed measures creating distribution bottlenecks and the associated global supply chain disruptions. Food prices have already risen drastically. If this trend intensifies further, for example if bread prices continue to rise, this, together with the sharp increase in energy prices, would destabilize numerous regions of the world.

 The threat is real

A report by the European Journal of Public Health shows that the global economy is under enormous strain as a result of the Corona crisis. This will increase the risk of longer-term food insecurity. This is already widespread in many high-income countries. After the global financial crisis in 2008, an estimated 13,5 million European households were food insecure. However, the current recession is much deeper and is likely to last longer. The entire food supply could come to a standstill, as a representative of the agricultural association adds.

There are two interrelated threats to food security: On the one hand, there is a food shortage, which, as already shown, triggers price increases. And on the other hand, an unfair distribution of the available food. A warning sign of this is the increasing number of people turning to emergency rations.

Due to the shortage of agricultural raw materials, European farmers are already complaining about the high prices of staple foods such as wheat and rice, which are used to make bread, pasta and other products. Price increases have been up by 17 percent since the beginning of 2020. Not only do these increase consumer prices, they also hit those people who are already struggling to make ends meet even harder.

In addition to the fear of a further escalation of the war, there is also the fear of a comprehensive food crisis that is taking place right on our own doorstep. The conflict is also having a dramatic impact on the European and especially the German energy sector.

Although it is repeatedly emphasized that the EU’s gas supply is secure, this is a fallacy. For example, the chief economist at VP Bank, Thomas Gitzel, is more honest, admitting that Europe is dependent on Russian gas. The EU gets almost half of what it needs from Russia and these gas deliveries cannot be fully offset.