Ukraine war delivers catastrophic hit to global food supply

Yara International chief sounds warning of increasing hunger in poorer countries

Harvesting wheat in Russia. The besieging of Ukraine is jeopardising the food supply and livelihoods of people in Europe, Africa and Asia. AP
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Russia’s invasion of Ukraine will deliver a catastrophic hit to global food supplies, the head of Norwegian fertiliser maker Yara International has said.

Svein Tore Holsether, chief executive of Yara, which operates in more than 60 countries and buys essential raw materials from Russia, said the international community must reduce its dependence on the Russians for food and described the war as "a catastrophe on top of a catastrophe".

With the global food supply chain already vulnerable to shocks, the war will increase food insecurity in poorer countries, Mr Holsether said. He spoke of an additional 100 million people suffering from hunger over the past two years.

The cost of fertiliser had already been high amid soaring wholesale gas prices but that situation will only worsen, he said.

“We were already in a difficult situation before the war … and now it’s additional disruption to the supply chain and we’re getting close to the most important part of this season for the Northern Hemisphere, where a lot of fertiliser needs to move on and that will quite likely be impacted," Mr Holsether said.

Ukraine and Russia are major exporters of some of the world's most basic foodstuffs, together accounting for about 29 per cent of global wheat exports, 19 per cent of world corn supplies and 80 per cent of sunflower oil exports.

But Russia also exports crop nutrients as well as natural gas, which is critical for producing nitrogen-based fertilisers.

In total, 25 per cent of the European supply of nitrogen, potash and phosphate – vital ingredients in fertilisers, which enable plants and crops to grow – comes from Russia.

"With the geopolitical conditions out of balance, the biggest sources of raw material to Europe's food production are being subject to limitations and there are no short-term alternatives," Yara International said.

With half of the world’s population getting food “as a result of fertilisers”, Mr Holsether said if that product was removed from the field, agricultural yield would drop by 50 per cent.

“It’s not whether we are moving into a global food crisis, it’s how large the crisis will be,” he said.

The Norwegian company, which is one of the world's biggest fertiliser producers, supplies Ukraine's agricultural sector and is a big buyer of raw materials, such as phosphate and potash, from Russia, which also supplies Europe's nitrogen fertiliser plants with natural gas.

Sanctions against Russia are already affecting Yara’s operations, with the company finding it harder to secure deliveries due to shipping industry disruption.

Yara’s offices in Kyiv were hit by a Russian missile, though its 11 staff members were unharmed.

The Russian government has urged its producers to stop fertiliser exports, adding another layer of jeopardy to the global food supply.

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Natural gas is vital for global agriculture as it is used to produce ammonia – another key ingredient in nitrogen fertiliser – and Yara has long been importing Russian gas to its European plants.

David Beasley, executive director of the World Food Programme, said last week that war in Ukraine would have a profound effect on the organisation's ability to reach the 120 million people it feeds. He said food, fuel and shipping costs would "skyrocket" in what he described in a Twitter post as "an absolute catastrophe".

Mr Holsether said the world must reduce its dependency on Russia in the long term for global food production.

Yara was already struggling before the Russia-Ukraine war started, suspending production at its plants in Europe when the surge in wholesale gas prices hit home and shipping rates escalated.

Meanwhile, wheat futures have soared in recent days on concerns that Russia's invasion of Ukraine, which began on February 24, will continue to disrupt grain shipments from the Black Sea region.

"One potential consequence is that only the most privileged part of the world population gets access to enough food," Yara said. While high prices may have a short-term positive effect on profit, they would lead to an unsustainable food system, leading to starvation and even conflict in the long term, the company said.

"It is therefore crucial that the international community comes together and works to secure world food production and reduce dependency on Russia, even though the number of alternatives today is limited," Yara said.

Fertiliser prices rose sharply in the final months of 2021, tracking soaring natural gas costs. This is leading to higher food prices, which could in turn result in famine for the most vulnerable, Yara said in October.

Updated: March 08, 2022, 9:59 AM
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