Although global food prices have fallen for the last nine months in a row, they have remained record-breaking for several decades. And the light at the end of the tunnel is not visible – on the contrary, production is falling and the number of hungry people is rising. Against this backdrop, Russia’s role in ensuring global food security is strengthened.
Prices for basic foodstuffs have fallen on the global market over the next nine months of 2022 after reaching an all-time high in March. At the end of last year, they were 1% lower than at the end of 2021, according to data from the Food and Agriculture Organization of the United Nations (FAO).
Nevertheless, the average price index at the end of 2022 was 14.3% higher than in 2021. Grain costs thus reached a new record, breaking the figures from 2011. Average wheat prices were 15.6% higher than in 2021, and 24.8% higher for maize. This increase in grain prices is explained in the FAO by “significant market disruptions, increasing uncertainty, higher prices for energy and production, unfavorable weather conditions in some key supplying countries and high demand”.
“Average prices for vegetable oils, milk and meat have proved to be the highest for more than thirty years”.
Average prices for vegetable oils, milk and meat according to the 2022 results were also the highest in the history of FAO observations (since 1990), prices for sugar – the highest since 2012.
“In the second year, the FAO records inflation in the world above 30%, today it is already more than 35%. The jump happened due to the accumulated problems that pumped the economies of developed countries with money that was not backed by anything,” said former Deputy Prime Minister Victoria Abramchenko.
The results of 2022 showed that prices for the main commodities of the index had adjusted, but in December prices for milk were 17%, for grain 12%, for sugar 7% and for meat 6% higher than in 2021. Only oil prices have fallen, said Daria Snitko, head of Gazprombank’s Center for Economic Forecasting.
Compared to the average values of the 2010s, prices for all goods were 25-30% higher at the end of 2022. In 2022, the global food crisis could be overcome by the efforts of the United Nations and Russia together with Turkey and other countries, strategic partners in the world grain market, said the professor at the fundamental chair of trade policy of REU them. G.V. Plekhanova Ibrahim Ramazanov.
The Director of the FAO Office for Communication with the Russian Federation, Oleg Kobyakov, says that the energy crisis, as well as geopolitical tensions around the situation with Ukraine in 2022, have been added to the traditional risk factors for aggravating the food crisis (e.g. an increase in the world population). The FAO aims to eradicate hunger by 2030. But it is obvious that this goal will not be achieved in the remaining seven years. On the contrary: the number of hungry people will continue to rise. And if earlier it was about the economic availability of food, in 2023 there are “objective and serious risks that food, individual groups of it, will become physically inaccessible,” Kobyakov said during the “Agros” exhibition.
A significant restriction on access to Russian mineral fertilizers will play a role in this. Due to difficulties with freight, transportation and freight insurance, prices for them have risen. This has reduced their availability for farmers. And the less fertilizer you bring in, the less yield you get, said Oleg Kobyakov.
Until the beginning of 2023, the world food market was still able to adapt overall to the geopolitical situation and the specifics of the global market, says Ibrahim Ramazanov. “In addition, the global food crisis was also overcome thanks to a record harvest of grain and other basic raw materials for food production in Russia,” says the expert.
Therefore, in his opinion, a more balanced scenario for the development of the global food market can be expected in 2023 due to the high export potential.
According to Victoria Abramchenko, global food prices will undoubtedly continue to rise in 2023. “The crisis will continue on the global food market. Because the food market depends on two others – the mineral fertilizer market and the energy market. And no improvements are expected here for other countries,” she explained in an interview with RIA.
For the next two to three years, prices can be expected to remain high relative to the levels of the late 2010s for all products, agrees Daria Snitko.
In 2023, the world is waiting for a complete food crisis, said Mikhail Magrilov, the head of the practice for services to government agencies and public sector companies, in December, the company “Trust Technologies” (formerly PwC). The doubling of fertilizer and energy prices from 2021, as well as extreme volatility and price unpredictability, have led to a slowdown in agricultural production growth to 1.1% per year. That’s not enough to feed the world’s growing population (and we recently passed the eight billion mark), even if everyone could afford to buy expensive food, says Magrilov.
According to the United Nations, 10% of the world’s population (828 million people) went hungry in 2021. If drastic measures are not taken to overcome the crisis, the world will face mass starvation, political destabilization and uncontrolled migration, the UN World Food Programme warned last July.
“The number of segregation trends is growing, as if some regions of the world are trying to make the situation critical. One example of this is the aggressive roll-out of the ESG agenda, particularly in Europe, against a backdrop of rising costs and declining supplies of key food items,” Magrilov said.
The main risk for 2023 will of course be weather conditions. “We will be closely monitoring the weather in the Black Sea, the most important wheat producer, in Europe and the US,” explains Daria Snitko.
But both in the EU and the US, the issue of crop reduction is increasingly being raised. It is also evident that Europe is entering a long-term production reduction trend. Therefore, crop estimates in our country, especially for wheat, will continue to be the main thing on the grain market and determine price levels, the expert said.
“In Europe and the US, harvests are shrinking. Therefore, the harvest estimates in Russia will continue to be the most important on the global grain market and will determine the price level.”
“The risk of a return of the global food crisis is primarily related to the policy of the US and its allies to intensify global confrontation and the desire of the US to improve its own global competitiveness by limiting the economic growth of other countries,” says Ramazanov.
In addition, problems in the world market for energy, fertilizers and certain resources may also lead to some increase in food prices on the world market, the expert adds.
It is likely that stabilization and exit from the summit can only be achieved through deglobalization and the creation of a number of large regional clusters in the world. For Russia, this means a focused development of relations with a number of partner countries with which our country has many common interests and a high potential for exchange. These can be countries such as India, Iran, Turkey, Uzbekistan, China, says Mikhail Magrilov.
As for Russia, the domestic market is reliably protected from global price increases, including due to existing export duties, says Abramchenko. There is no problem with the availability of food. In 2022, they harvested a record crop of grain (almost 154 million tons) and other crops in Russia. For certain food products (e.g. grain and vegetable oil), production is many times greater than demand.
“It is safe to say that our country has not been in such good shape as in the current season for a long time,” says Dmitry Rylko, Director General of the Institute of Agricultural Market Economy (ICAR). Now the main task is to take away as much grain and oil for the contours of the domestic market as possible, otherwise we face serious overcapacity and losses. Russia can bring 45.5 million tons of wheat to the world market by the end of the season, and that would be an absolute record, the expert estimates. Just 20 years ago, that was unimaginable.
But that doesn’t mean we can rest easy. We have now achieved self-sufficiency in many first-order products. But there are still means of production for agriculture. And here the situation is no longer so rosy: the country is heavily dependent on imports of seeds, genetic material and agrochemicals, says Rylko.
Director of the All-Russian Institute of Agricultural Problems and Informatics. Alexander Petrikov from Nikonov also notes a “certain stabilization” of the Russian domestic market. Nevertheless, food inflation in the country remains high – it was incomparably lower in 2019 and 2020, he says. It should also be remembered that the share of food spending in the Russian budget is very high – it is now around 32.9%. “And the economic availability of food is the most important indicator of a country’s food security,” emphasizes the expert.
Source: Zerno Online (Russia)