Global food prices, while falling for the past nine straight months, 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 starving people is increasing. Against this background, Russia's role in ensuring global food security will be strengthened.
Prices of basic foodstuffs have fallen in the next nine months of 2022 in the global market after the 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 percent higher than in 2021. As a result, grain costs hit a new record, breaking 2011 figures. Average wheat prices were 15,6 percent higher than in 2021, for Corn by 24,8 percent. This increase in grain prices is explained in the FAO by "significant disruptions in markets, increasing uncertainty, higher prices for energy and production, unfavorable weather conditions in some key supply countries and strong demand".
"The average prices of vegetable oils, milk and meat have proven to be the highest in more than thirty years".
Average vegetable oil, milk and meat prices according to the 2022 results were also the highest in the history of FAO observations (since 1990), sugar prices – the highest since 2012.
“In the second year, the FAO records inflation in the world over 30%, today it is already over 35%. The jump happened because of the accumulated problems that pumped the economies of developed countries with money backed by nothing," said former Deputy Prime Minister Victoria Abramchenko.
Results for 2022 showed that prices for the index's main commodities had adjusted, but in December milk prices were down 17%, for Grains by 12%, for Sugar by 7% and for meat by 6% above 2021 levels. Only oil prices have fallen, said Daria Snitko, head of Gazprombank's Center for Economic Forecasts.
Compared to the average values of the 2010s, the prices of all goods were 2022-25% higher at the end of 30. In 2022, the global food crisis could be overcome through the efforts of the United Nations and Russia together with Turkey and other countries, the strategic partners in the global grain market, the professor at the REU's undergraduate trade policy chair told them. GV Plekhanova Ibrahim Ramazanov.
Director of the FAO Office for Communications with the Russian Federation Oleg Kobyakov says that the energy crisis, as well as geopolitical tensions surrounding the situation with Ukraine in 2022, are among the traditional risk factors for the food crisis to worsen (e.g. a increase in world population) were added. The FAO aims to eliminate hunger by 2030. But it is obvious that this goal will not be reached in the remaining seven years. On the contrary: the number of starving people continues to rise. And if earlier it was about the economic availability of food, then 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 of access to Russian mineral fertilizers will play a role in this. Due to difficulties with cargo, transport and cargo insurance, prices for them have increased. As a result, their availability to farmers has decreased. And the less fertilizer you put in, the less yield you get, Oleg Kobyakov said.
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 world food crisis was also overcome thanks to a record harvest of grain and other basic raw materials for food production in Russia," said 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 in the global food market. Because the food market depends on two others - the mineral fertilizer market and the energy market. And no improvements can be expected for other countries here,” she explained in an interview with RIA.
For the next two to three years, prices can be expected to remain high for all products relative to late-2010s levels, agrees Daria Snitko.
In 2023, the world is waiting for a full-blown food crisis, Mikhail Magrilov, the practice's head of services to government agencies and public sector companies, told Trust Technologies (formerly PwC) in December. The doubling of fertilizer and energy prices from 2021, as well as extreme volatility and price unpredictability, has meant agricultural production growth has slowed to 1,1% per year. That's not enough to feed Earth's growing population (and we recently surpassed eight billion people), even if everyone could afford to buy expensive groceries, Magrilov says.
According to the United Nations, in 2021, 10% of the world's population (828 million people) would go hungry. Unless drastic measures are taken to end the crisis, the world will face mass starvation, political destabilization and uncontrolled migration, the UN World Food Program warned last July.
“The number of breakup trends is growing, as if some regions of the world are trying to make the situation critical. An example of this is the aggressive adoption of the ESG agenda, particularly in Europe, against a backdrop of rising costs and declining supply of key commodities,” Magrilov said.
The main risk for 2023 will of course be weather conditions. “We're going to look at the weather in the Black Sea, the main wheat producer, in Europe and the USA, watch closely,” explains Daria Snitko.
But both in the EU and in the USA the topic of crop shortening is increasingly being addressed. It is also evident that Europe is entering a long-term production cut trend. Therefore, estimates of the harvest in our country, especially wheat, will continue to be the main thing on the grain market and determine the price level, the expert says.
“In Europe and the USA the harvests are shrinking. Therefore, crop estimates in Russia will continue to be the most important on the global grain market and determine price levels.”
“The risk of a return of the global food crisis is primarily related to the politics of USA and their allies e.gusammen intended to exacerbate the global confrontation, and the desire of the USAto improve their own global competitiveness by constraining the economic growth of other countries,” says Ramazanov.
In addition, problems in the world market for energy, fertilizer and certain resources can also lead to a certain 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 around the world. For Russia, this means a focused development of relationships with a number of partner countries with which our country has many common interests and high exchange potential. This can be countries like India, Iran, Turkey, Uzbekistan, China, says Mikhail Magrilov.
As for Russia, the internal market is reliably protected from global price increases, also due to existing export tariffs, according to Abramchenko. There is no problem with food availability. In 2022, they harvested a bumper crop of grain (almost 154 million tons) and other crops in Russia. For certain foods (e.g. grain and vegetable oil), production is many times greater than demand.
"One can certainly say that our country has not been in the best shape it has been in the current season for a long time," says Dmitry Rylko, Director General of the Institute for Agricultural Markets and Economy (IKAR). 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 severe 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. That was unimaginable 20 years ago.
But that doesn't mean we can calm down. Now we have 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 seed, genetic material and agrochemical imports, says Rylko.
Director of the All-Russian Institute of Agricultural Problems and Informatics. Nikonov's Alexander Petrikov also notes a "certain stabilization" of the Russian domestic market. Still, food inflation remains high in the country — it was incomparably lower in 2019 and 2020, he says. In addition, it should not be forgotten that the share of food expenses in the Russian budget is very high - now it is about 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 (Russian)