Grain prices skyrocketed, and several countries were on the brink of starvation. But according to experts, it is not only the war in Ukraine that is responsible for the rise in food prices.
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Since Russia’s invasion of Ukraine on February 24, there have been countless articles about soaring food prices and the threat of a global hunger crisis.
At the same time, there are record-high electricity bills and fuel prices around the world, including Norway. The effects of the ripple have been felt from the UK to Kenya and Sri Lanka.
Many people have questioned how much prices have gone up in just a few short months, and according to Swedish researchers, the Ukraine war isn’t enough to explain the food crisis the world is facing.
Economics professor Torbjorn Jansson at the Swedish Agricultural University SLU tells TT News.
Together with several of his colleagues, he investigated how the production losses caused by the war in Ukraine affected global food prices.
their conclusion? Food prices have risen unreasonably.
many reasons
Ukraine is often called the breadbasket or granary of Europe. The country with huge amounts of deep black soil is one of the largest grain producers in the world.
However, the Russian attack halted exports as Ukrainian ports and mining were closed. Fear of a major famine spread far beyond the two warring countries. There was also a great deal of uncertainty as to whether the grain agreements Russia and Ukraine had with the United Nations and Turkey would honor.
But if we believe the experts, prices were on the rise even before Russian tanks reached the borders of Ukraine.
– The price of a number of raw materials rose even before Ukraine, in part due to a sharp increase in prices for synthetic fertilizers. Ukraine has led to an increase in prices on top of that, says economics professor Ostine Foros from the Norwegian School of Economics in Bergen to NTB.
He points to the economic consequences of the pandemic, rising fuel prices, an energy crisis and exorbitant agricultural costs as an explanation. This increase in prices was exacerbated by the situation in Ukraine, which aggravated the already difficult global economy.
The production line was affected by the rise in energy prices as a result of changes in oil prices. He explains that this was further affected by the war in Ukraine and the sanctions imposed on the Russian oil giant.
Unreasonable price increase
In Sweden, the price of wheat has increased by 30 percent, despite the fact that Ukraine accounts for only about 4 percent of world wheat production. In 2020, the country produced about five percent of the world’s barley. Of the market share of sunflower oil, it accounts for 26 percent.
Jansson believes that this does not justify the high prices after the Russian invasion of the country.
– We should have expected a price increase, maybe ten percent, no more. Ukraine’s share of world production, and of grain exports, is not greater, he told TT.
– Many people have wondered why the prices are so high, and the answer is that we don’t know why. He adds that the fact that production has decreased is not a sufficient explanation.
Voros believes that food prices in Norway will stabilize over time.
Grocery chain purchase prices are adjusted on February 1 and July 1 of each year. Then prices usually rise, and then stabilize after a few weeks. It’s normal and will likely happen this year as well, but with greater impact, he says.
The economics professor also believes that more committed consumers are ramping up competition for Norwegian grocery stores.
It is a positive side effect of the negative situation we are in. The Norwegians also stress that the price increase will be noticed, but it is not for us that it hurts the most.
lack of money
However, this is the case in many other countries.
The United Nations Development Program recently stated in a report that in the first three months after Russia’s attack on Ukraine, the number of poor people in the world increased by 71 million due to rising food and energy prices.
This corresponds to 5 million people falling into poverty every week, roughly the total population of Norway. The majority of them now live on less than 1.9 dollars a day, barely 20 kroner.
Jansson believes that market speculation and fear overwhelmed many suppliers when the war broke out.
– It is some kind of insurance. He explains that primary manufacturers and breweries, who buy for example a lot of grain, wanted to ensure they were available at an uncertain time.
Today, grain is traded in grain exchanges where it is often bought and sold long before the crops are harvested. Similar to selling stocks, the price rises if demand increases, making grain stocks very valuable.
Between February 1 and April 5, the price of wheat, which is traded on the Matif Grain Exchange in Paris, rose by as much as 35 percent.
fatal economic crisis
More than 50 million people in East Africa face acute food insecurity this year alone, and there is already a hunger crisis in Somalia and South Sudan. Many aid organizations believe that this crisis, exacerbated by the war in Ukraine, has also been neglected as a result of the international focus on Ukraine.
It is not just the money given to Ukraine that is causing the problems, according to several UN agencies. Economic development in itself is fatal. Developing countries that lack cash reserves and high debt become victims of rising interest rates at the same time as prices are rising.
The United Nations Development Program has already sounded the alarm and said that this is a crisis that will only expand if the world does not react collectively. Janson agrees and stresses that the lack of money is the biggest problem.
People do not go hungry because of the lack of food in the world. They are starving because they have so little money. He adds that there is as much food now as there was before the war.
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