Conflict in Ukraine: likely to impact global agricultural markets and food security

The FAO Chief Economist, Máximo Torero, briefed journalists virtually in New York on an FAO report on Ukraine and the Russian Federation and what the current conflict means for global food markets.

Briefing journalists virtually in New York today was FAO Chief Economist Máximo Torero, who shared latest updates and priority lines of action around the ongoing war in Ukraine and the likely impact to global food and agricultural input prices. 

According to FAO projections and market simulations, the number of undernourished people in the world could increase by anywhere from 7.6 million to 13.1 million relative to the baseline scenario, as a consequence of the conflict.

The Chief Economist presented the recent report ‘The importance of Ukraine and Russia for global agricultural markets and the risks associated with the current conflict,’ which identifies core risks specific to food security, agricultural markets, trade, energy, and humanitarian lines of work. All of these are closely interwoven and point to likely impacts that extend beyond the immediate source and vicinities of the ongoing hostilities, Torero explained.

The conflict is not only affecting food security in the country, forcing massive displacement, with likely serious impacts to food production and agriculture-based livelihoods in Ukraine, but is also affecting global food security given that the Russian Federation and Ukraine represent one-third of global cereal exports.

“The crisis represents a challenge on food security for many countries, especially for low-income, food import-dependent countries and vulnerable populations,” Torero pointed out.

An uncertain trajectory ahead, with ripple effects to be felt across the globe

Beyond the immediate humanitarian needs on the ground, Torero explained the grave repercussions that the conflict is likely to have on global food and agricultural inputs prices. The probable disruptions to agricultural activities in Ukraine and the Russian Federation – two major exporters of staple commodities – could seriously escalate food insecurity globally, at a time when international food prices are already at an all-time high. 

Wheat is a staple food for over 35 percent of the world's population, and the lack of substitutability and dietary diversity will likely compound the pressure on wheat prices.

“Almost 50 nations are dependent on both countries for over 30 percent of their wheat import needs. Of these, 26 countries depend on Ukraine and the Russian Federation for over 50 percent of their wheat import needs,” the Chief Economist said. 

What’s more, many countries depend on imported foodstuffs and fertilizers, including several Least Developed Countries (LDCs) and Low-Income Food-Deficit Countries (LIFDCs), who heavily rely on Ukrainian and Russian food supplies. FAO expects further price and supply pressure on commodities that are vital to ensuring global food security. This comes at a time when between 720 to 811 million people are already facing hunger, Torero stressed.

Both Ukraine and the Russian Federation are among the top three global exporters of wheat, maize, rapeseed, sunflower seeds and sunflower oil. In addition, the Russian Federation also stands as the world’s top exporter of nitrogen fertilizers and the second leading supplier of both potassic and phosphorous fertilizers. 

Many European and Central Asian countries also rely on the Russian Federation for over 50 percent of their fertilizer supply, Torero remarked. 

Food production and prices as a function of global energy prices

Especially in developed countries, agriculture can be an energy-intensive industry. Rising energy prices also stand to increase input and production prices, which may very well further increase food and agricultural input prices to consumers.

With the Russian Federation as a key player in the global energy market, agriculture will be touched by the sharp increase in energy prices that we are seeing now and that has accompanied the conflict.

Related links

• Watch the recording of today’s briefing here.
• Access the FAO Rapid Response Plan and the latest humanitarian response update on Ukraine.