FAO Warns: The Ukraine War Could Trigger a Food Price Rise
The recent Russian invasion of Ukraine has thrown agricultural supply and demand conditions in the region and around the world into disarray. Here's how the war could cause food prices to increase.
Recent military action in Ukraine has significantly increased the uncertainty of agricultural supply and demand conditions in the region and globally. According to the Food and Agriculture Organization (FAO), the conflict could trigger world food prices to rise further.
Food Prices to Rise by an Average 20%
In a press release from April 2022, the FAO warned a “global supply gap” caused by the Russian invasion could push up international food and feed prices by 20% above their already elevated levels.
The FAO Food Price Index, which tracks monthly changes in the international prices of a "basket of commonly-traded food commodities," averaged 159.3 points in March. That is up 12.6% from February, which already saw the highest level since the organization began tracking in 1990. It is also 33.6% higher than it was in March 2021.
Both Russia and Ukraine are in fact among the most important producers of agricultural commodities in the world. In particular, Russia is the world’s biggest wheat and maize exporter (respectively 30% and 20%), while Ukraine is a leading source of grains and oilseeds.
According to the FAO, the war could cause disruptions to Ukraine’s grain and oilseed harvests as well as on Russia’s exports of cereals and other foodstuff, due to the trade restrictions in place.
Moreover, the FAO Cereal Price Index was 17.1% higher in March than it was in February. The expected loss of exports from Russia exacerbated the already tight global availability of wheat, and world wheat prices rose sharply in March, soaring by 19.7%.
With Ukraine being the world's leading exporter of sunflower seed oil, the rising prices of sunflower seed oil and crude oil also triggered a price rise of other vegetable oils, like palm, soy and rapeseed. Altogether, the FAO Vegetable Oil Price Index rose 23.2% in just a month.
For other foodstuff, such as sugar, meat, and dairy commodities, FAO saw smaller increases in its indices, for which it cited a number of factors.
Warning of a food security crisis in countries that rely on exports of Russian and Ukrainian food commodities, the FAO said “every effort” should be undertaken to keep supply chains “fully operational.” It also mentioned the need to protect standing crops, livestock, food processing infrastructure, “and all logistical systems.”
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