The terrible devastation in Ukraine has reprised the term ’food security’, last feverishly factored into international policy discussions in the mid to late noughties. The volumes of grain grown in the Black Sea region is vast but, more importantly, the volume of ‘Black Sea’ products exported to countries that rely on cheap calorific inputs is essential. Or is it? Will areas of the world face famine as a result of this conflict?
First of all, let’s look at the volume of grain exported from the Black Sea. Just looking at wheat, of the circa 200mt traded globally, Russia produces around 21% and Ukraine 9% . So, in total, 30% of wheat currently plying trade routes is in question. Of this, there is no clear risk to Russia’s production as their cropping regions are unscathed by conflict, as are their supply chains through to the Black Sea. Sanctions are a different matter but rarely do sanctions extend to food and numerous wheat importing countries are not currently on the Russia sanctioning page (eg, Turkey, Iran and China). Potentially, in the absolute worst case, 18 million tonnes of Ukrainian wheat will not be exportable this harvest due to lack of production or disrupted supply chains (noting that large volumes of corn, sunflower seed, rapeseed and barley are at risk as well).
What can the world do?
1) Eat less – Not as bizarre as it seems at first, this is an option that is already being actively encouraged in China. China’s banquet culture encourages over-eating and waste through the generosity of its offerings. President Xi Jinping called on Chinese society to "fight against food waste" and started the Clean Plate campaign. In response, restaurants have introduced policies of one less dish per banquet and Mukbang, a social media phenomenon which streams influencers eating ridiculous serving sizes, now encourage messages such as “save food; eat properly" and eating leftovers. Can this have an impact? Due to the size of China’s population – absolutely. When the Chinese Government cracked down on officials consuming alcohol over boozy lunches in 2014, it had a notable influence on the volume of imported grains used to distil the popular white spirit Baijiu.
Importantly, this option only works for discretionary food consumption. Much of the world’s population is not in the position to eat less as they are already nutritionally deficient. On the other hand, countries with high obesity rates would be healthier by eating less - including Australia.(According to US data, 29% of us are ‘carrying a little extra’).
2) Eat other things - Substitution is the go-to release valve for seasonal supply variances. If corn is in short supply, wheat is used and, if wheat is in short supply, it is replaced by barley and so on. Market forces prevail. But certain foods have a different net impact on grain volumes than others. For example, animal feed is a significant use for all grains and different animals have different feed conversion ratios. Roughly speaking, chicken is 3.5 times more efficient at turning grain into meat than cattle. Moving meat consumption along the spectrum toward the chicken end of efficiency by only a few percent will free up many millions of tonnes of grain whilst maintaining the same level of animal protein supply.
3) Don’t burn grain - In the US, approximately 140million tonnes of corn are used to make ethanol for fuel. This is not driven by market forces but by Government fuel security mandates. Brazil also uses large amounts of corn for ethanol and biodiesel, made from oilseeds such as canola and sunflower, is a significant and growing market in Europe. Of course, energy supply is also being significantly impacted by the Ukrainian conflict, so this option is not without trade-offs.
4) Waste less - In WA, the supply chains maintained by CBH are world-leading, with limited waste (typically around 0.3% of tonnes received) but, in places like India, many millions of tonnes of grain are stored in stacks on the side of the road and huge amounts are lost through weather damage, infestation and ‘sweeps’. Supply chains require capital investment which is not a simple fix but it is noteworthy that waste is lower when grain is scarce and expensive, just through greater care being taken in the storage and handling process. Saving 1 million tonnes is less than a 0.2% improvement across the 750mt global wheat crop.
The above options are not exhaustive and only focus on the demand side. Nothing encourages fallow land or the marginal back paddock to be brought into production as much as high prices. Market forces drive the changes that even-out shortfalls in supply and we may not even know it’s happening. We all ‘eat less’ when food manufacturers reduce the size of their product to keep prices constant. Who remembers when a block of ‘glass and a half’ milk chocolate was 200g, not 180g?
The globe can absorb the loss of supply should Ukraine reduce its grain exports but it is unlikely that the potential negative impacts will be fully prevented. Rich countries will push prices higher because they can, less wealthy exporting countries will introduce tariffs and quotas to protect their domestic economy and, consequently, there will be some importing countries that will not be able to rise with the pricing tide. Unfortunately, the dreadful impacts of war have a habit of spreading far beyond the conflict zone.
