Russia Ukraine war chokes global wheat supply and strangles developing economies

Global food prices rose to new heights in 2021 on account of a combination of factors, notably an uneven global economic recovery from the COVID-19 pandemic and widespread supply chain disruptions. According to the Global Report on Food Crises 2022, there has been an 80% increase in food insecurity since 2016. This condition of food insecurity is further deteriorating in the face of the war in Ukraine.

“Doubly Devastating: Local communities disproportionately affected by food, fuel, and fertiliser price rises”, ActionAid’s rapid survey from some of the poorest countries in Africa, Asia, Latin America and Western Asia has recorded a doubling or tripling of prices of basic wheat based food items which are consumed on a daily basis.  In the 13 countries where the survey was carried out, average cost of wheat products has increased by 50% in local markets. Families in Somaliland and Lebanon are having to spend more than double or triple the amount they spent before on basic commodities such as bread or pasta. The ongoing war is likely to further create ripple effects in the rest of the world.  

Ukraine and Russia together account for 30% of global exports and Ukraine is the world’s 6th largest supplier of wheat. Now with the war threatening the global wheat supply, India is likely to step up and attempt to fill the gaps due to the expectations created from last year’s bumper harvest and high export of wheat. However, the same success in wheat harvesting is unlikely to be witnessed in 2022.

Untimely heatwaves currently impacting India and its wheat belts have caused a decrease in production. Since last year, wheat production has been estimated to go down by 6% causing a 2-3% spike in domestic prices. Despite this downward trend in production and severe weather conditions, the Indian government intends to continue the export of wheat to the international market. For an economy which is not out of the woods, this would lead to an increase in the price of wheat and other commodities and the Government’s Public Distribution System (PDS) may also come under stress.

The sudden decision to revise Repo rates upwards is in view of checking sustained high inflation rates and the impact it is already been having on the consumption baskets of working classes of India – and its majorities.    

Confronted with these challenges, it is imperative for the Indian welfare state to protect its most vulnerable populations while still sustaining exports to countries which heavily rely on import of food. Now is the time for the government to take measures to mitigate the challenges being caused by ongoing severe climate shocks and an international conflict.

Protection measures to control food price inflation such as the one taken by RBI recently, need to be augmented with steps announcing long awaited social security packages under the revised social security code. The extension of the Pradhan Mantri Garib Kalyan Anna Yojana until September 2022 is a welcome step, but needs both further extension and enhancement. There is scope for enhancing the scheme by including the provision of cooking oil to the items provided under the scheme, in view of escalation in edible oil prices. Additionally, subsidies to farmers should also be allocated to ensure the production of grains, fruits and vegetables, which has suffered due to the onset of early summers and frequent heatwaves. 

Sandeep Chachra, Executive Director of ActionAid Association says, “We must recognize that COVID-19 battered working classes of India are already in a state of high precarity. Further climate change shocks of which heatwaves are only a part, the ongoing international conflict, protection measures taken by other countries and adverse global price shocks need to be urgently responded to with measures for food security and social protection. Even as summer sets in, we need to ensure our most vulnerable are most protected.”