Weather threatens global food security: What should Ukraine do?
Risk zone includes China, USA and India
The situation in global food markets, which, according to the decreasing FAO food price index dynamics over the past year, has not been a cause for concern, may worsen. Several big-player countries in the global agricultural market have encountered weather conditions that threaten future harvests.
Mind explains the situation in the world agricultural market and how Ukraine can take advantage of it.
What price dynamics for food is the FAO currently recording? Over the past year, following a shocking leap in May 2022 – triggered by Ukraine's temporary absence in global exports due to the blockade of Black Sea ports by russia – prices for major agricultural categories have been showing a steady decrease. In May 2023, the average value of the FAO Food Price Index amounted to 124.3 points, which is 3.4 points (2.6 percent) lower than the April indicator and as much as 35.4 points (22.1 percent) below the peak level recorded in March 2022.
The May decline was due to a significant reduction in the price indices for vegetable oils, cereals, and dairy products against the backdrop of a slight increase in sugar and meat price indices.
It should be noted that May's figures did not yet include data on worsening weather conditions in a number of countries – both producers and importers.
Where exactly is the weather threatening harvests? The National Meteorological Centre of China warned about the approach of hot weather in the northern regions of the country, which could damage corn and wheat fields. In southern regions, on the contrary, heavy rains are expected, which could harm rice plantations.
Recall that China is the world's largest importer of wheat, corn, and soybeans.
In the USA, there is an increasing drought that threatens agricultural states, including the Corn Belt.
In India, the heat is having an indirect impact – due to the melting of glaciers in the Himalayas, bodies of water are overflowing their banks, flooding fields.
And what about Europe? Last year, Europe experienced the hottest summer in history and this year the record could be renewed. The European Drought Observatory (EDO) has warned of drought in a quarter of the territories of the 27 European Union countries.
Water levels have critically dropped in Western Europe – the Rhine is already on the brink of halting navigation.
Has Ukraine also been affected by the drought? No. There have been no widespread issues that would be caused by high temperatures this season. However, Ukrainian agrarians have faced so many negative factors that they might well envy their colleagues who are 'drying up'.
Reduction of areas, mine pollution, lack of working capital – all this generated a harvest forecast for 2023 at only 46 million tonnes. The figure corresponds to the performance of the Ukrainian agri-industrial complex twenty years ago.
So, won't it be possible to take advantage of the global agricultural tension? First of all, it should be noted that in the 2022/23 MY (ending July 1), despite incredible logistical complications, the volume of grain and leguminous crop exports from Ukraine as of June 26 reached 48.42 million tonnes, exceeding the indicator of the previous season (48.36 million tonnes).
The export of several crops has decreased. In particular, since the start of the season, more than 16.6 million tonnes of wheat have been shipped – 11% less than the figure of the previous season, and 2.7 million tonnes of barley – 53% less. On the other hand, corn exports exceeded 28.8 million tonnes – 23% more than the dispatch figure a year earlier, and flour – 151,000 tonnes, which is twice the figure of the previous season (70,700 tonnes).
In the upcoming season, a positive export dynamic can hardly be expected – due to a significant reduction in harvest volumes and, accordingly, a reduction in resources for export. The only scenario under which Ukraine can increase exports in 2023/24 MY is the continued outflow of the population and a further decrease in the volumes of food and processing industry processing.
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