We’re in the midst of a global food crisis – so how bad will it get for Britain?

global food crisis
global food crisis

In a newspaper article last week, Oleg Ustenko, an economic adviser to the president of Ukraine, put a brave face on the catastrophic consequences Russia’s invasion is having on food security, for his country and for the rest of the world.

Ukraine, he wrote, is the world’s fifth-largest exporter of wheat, and Ukrainian farmers should soon be seeding their fields in some of the richest soil in the world.

But those parts of the country which are most fertile in terms of agricultural production are now consistently under aerial attack and artillery bombardment.

‘Ukrainian farmers are resilient,’ he wrote. ‘But they also have other important tasks at hand. These currently include capturing Russian military equipment, blowing up fuel convoys and allowing demoralised Russian soldiers to talk with their mothers. We are a humane and innovative people, but we also know what our priorities must now be.’

Intact as the Ukraine sense of irony may be, it hardly mitigates the catastrophic effect that Russia’s invasion is having on food supply.

Odesa’s formerly bustling docks – the gateway for Ukraine’s exports to the world – are now silent. Offshore, just beyond sight, prowl the warships of Putin’s Black Sea fleet. Once or twice a day, sirens wail over the whole city.

The tonnes of grain and corn stored in the farm silo where Svitlana Sirko works would ordinarily at this time of year be on their way to Odesa. The bitter wind blowing across the farm’s 3,500 acres might seem unyielding in early March, but the rich, black soil produces plentiful wheat and maize. Along with countless others across the huge country, this medium-sized farm with 20 labourers contributes to Ukraine’s reputation as the breadbasket of Europe. After harvest as much as 10,000 tonnes is gathered in the silo.

Each year, the grain and corn is taken 80 miles south to the Black Sea port, where grain traders sell it on to more than 50 nations. With prices and contracts agreed, the grain and corn is loaded at the docks onto a fleet of international freighters.

Farm administrator Svitlana Sirko, like many Ukrainian agriculture workers, has found her work curtailed by the war - Simon Townsley for The Telegraph
Farm administrator Svitlana Sirko, like many Ukrainian agriculture workers, has found her work curtailed by the war - Simon Townsley for The Telegraph

Farm employees like Sirko, who works in a small administrative office, might not be told the final destination of their crop, but the image of it going to feed the world and being shipped to the four corners of the globe is a source of pride.

This year, however, war and a Russian naval blockade have ended that comforting image. “We are very proud of our grain and feeding the world,” she told The Telegraph at the farm near Mykolaivka. “We wish there was no war, because we can’t work properly.”

The Ukraine war has caused the perfect storm of shortages of wheat, rising fuel prices and shortage of fertiliser products.

As Ambrose Evans-Pritchard wrote in The Telegraph last week: ‘The world faces what amounts to a commodity “black swan” across the gamut of primary resources. Oil, gas, coal and the “ags” are all spiralling higher together, with metals catching up fast. It is a systemic stagflation shock, an intractable problem for central bankers.’ And for all of us.

Roman Leshchenko, Ukraine’s agriculture and food minister, told The Telegraph that while export blocks had been placed on badly needed commodities like beef, sugar, salt and millet, the country still wanted to export wheat and corn. Yet that had been made nearly impossible by a blockade of Ukraine’s southern ports by the Russian navy. March, April, May and June should be the peak export months, but instead the ships are stationary and the terminals closed.

Leshchenko said: ‘All import and export must be over the land border in Western Ukraine. This is a huge, huge problem right now. It will be a huge crisis in the world, especially if you are talking about food security for many countries that really depend on our supply.’

The land route can only handle a tiny fraction of what normally flows through the ports. Leshchenko estimates 300,000 tonnes a month can be shifted by land, compared with 4 million tonnes a month by sea. The bottleneck means silos are filling and grain is not being exported to buyers in the Middle East, Africa and beyond. He estimates there is already 15 million tonnes of wheat, barley and corn in storage.

‘We don’t need so much,’ he said, ‘and we have these contracts with different countries and it’s critical for us to start to export.”

But the bottlenecks are sending prices soaring and Ukraine’s normal customers in the Middle East, such as Egypt, Yemen and Lebanon, cannot afford the new rates, he said.

‘The problem is that their budget doesn’t allow them to buy the huge price for the wheat now. Of course it’s a huge problem for their economy, for the stable situation in the region.’

The unrelenting cycle of agricultural seasons means that unless the war is resolved quickly, it will soon affect next year’s crop, too. Already fertiliser is scarce and fuel for tractors is difficult to find. Oleg Arbaiter, who owns the Mykolaivka farm, says he now expects to sow fewer fields. The farm will have a far lower yield.

‘The price will go up as a result,’ he says. ‘It’s not going to be possible for these countries to buy Ukrainian wheat. As a result, they will face humanitarian problems.’

International grain trade

Together, Russia and Ukraine account for around 30 per cent of the world’s traded wheat. Russia is the world’s largest exporter, accounting for more than 18 per cent of international exports, followed by America, Canada, France and Ukraine. Ukraine is also the biggest exporter of seed oils.

For barley, these two countries account for 32 per cent of international trade. For corn, it is 20 per cent, and 80 per cent of sunflower oil for cooking comes from this area.

As supplies dry up or are disrupted, those who will suffer most are those least able to absorb the shock of shortages and rising prices – the global poor.

Egypt, where almost a third of the population lives below the poverty line, is the world’s biggest importer of wheat, and spends more than $4bn annually to feed its population of over 100 million. Together Russia and Ukraine provide more than 70 per cent of Egypt’s wheat demand – followed by Bangladesh, Sudan, Nigeria, Azerbaijan and war-torn Yemen.

Talking last week to the BBC, David Beasley, the executive director of the UN’s World Food Programme (WFP), said that commodity prices are at their highest level since 2008, while shipping prices ‘are doubling, tripling and quadrupling. We’re seeing that in the marketplace as we speak. And it’s only going to get worse.’

The WFP receives 50 per cent of its grain from Russia and Ukraine. And since the invasion of Ukraine, the global price of wheat has risen by approximately 50 per cent.

Compounded by the effects of the pandemic, Beasley says the world is now in a state of what he calls ‘marching towards starvation – these are people who don’t know where the next meal is coming from. That number went from 135 million people to, even before Ukraine, 276 million people.’

The WFP has gone from feeding 80 million people just a couple of years ago, he says to 125 million people today, ‘and we need to scale up to 145-150 million people this year. We don’t have the money to do it. Leaders have got to step up and really understand how significant this is, not just for the poorest of the poor. It’s going to impact every consumer on Earth.’

The impending price war

The UK is fortunate to be protected from the worst of the war’s effects on global food supply – if not from rising prices.

Until the 1970s, the UK imported large quantities of flour and was reliant on imported wheat for bread varieties. Today millers use more than five million tonnes of home-grown wheat each year, compared with under two million tonnes in the early 1970s.

The UK is largely self-sufficient in production of grains, producing over 100 per cent of domestic consumption of oats and barley and around 85 per cent of wheat. The remainder comes mainly from Canada and Germany. But although we are not reliant on Russia or Ukraine for the commodity, the price of wheat is still subject to market fluctuations.

Alex Waugh, director of industry trade body UK Flour Millers, says that prices have risen in the last two weeks, to the highest levels since 2008.

‘One of our members called me this week and said he paid £360 a tonne for bread wheat, which at the start of the season in September, immediately after harvest, would have been £210. That’s an increase of around 70 per cent over the past six months. Wheat prices were around £290 in December, so we have seen a further £70 plus since then as a direct result of the crisis in Ukraine.’

Crops, of course, do not grow on their own, at least not in the quantities necessary to meet demand. Fertiliser is necessary. And it is Russia that controls most of the key ingredients, such as nitrogen, potash and phosphate, used in the manufacture of fertiliser.

According to Svein Tore Holsether, president and CEO of Norwegian company Yara International, one of the world’s largest suppliers of fertiliser, about a quarter of the key nutrients used in European food production come from Russia. Yara operates in more than 60 countries and supplies fertiliser to 120 countries including the UK, where it is a major supplier. In the UK, fertiliser can make up more than a third of input cost for crops such as corn.

In the short term, says Holsether, there is no alternative source of supply. ‘For potash 40 per cent of the world’s production and exports come from Belarus and Russia. These are mining operations. So there are no short-term solutions to that. They are significant in nitrogen and phosphate. In order to produce nitrogen in Europe we use natural gas, and so you get a double impact because of this.

‘Half the world’s population gets food as a result of fertilisers, and if that’s removed from the field for some crops, [the yield] will drop by 50 per cent.

‘For me, it’s not whether we are moving into a global food crisis – it’s how large the crisis will be.’

Yara relies on vast quantities of Russian natural gas for its European plants. Huge amounts are needed to produce ammonia, the key ingredient in nitrogen fertiliser. Yara is a leading global ammonia producer, with a market share above 20 per cent, and one of the leading distributors in the UK. The cost to produce a tonne of ammonia today is around $2,500. A year ago that same tonne would have cost about $160. ‘These are numbers that we’ve never seen before,’ Holsether says.

And there are other commodity prices to worry about. Your tin of baked beans or chopped tomatoes would not be possible without aluminium, of which Russia is a major producer, accounting for six per cent of global output. China accounts for about half of global output, but most of that stays in China. At the end of last year aluminium was trading at about £2,500 a tonne; this week it was trading at £3,450.

As Waugh points out, most of the wheat that is produced around the world is not exported but stays in the country that it was grown in. Overall, there are approximately 780 million tonnes of wheat produced globally each year, of which 15 million are produced in the UK.

‘Russia and Ukraine account for about 50-55 million tonnes of what is traded internationally over the course of a year, which amounts to about seven per cent of normal worldwide wheat production.

‘In other words, the rest of the world does not have to produce an awful lot in order to fill that gap. In the short term things are going to be more expensive. Energy prices have gone up, gas has gone up, and that affects production. And there are quite a lot of minor effects too. In Ukraine they produce quite a lot of grain organically, which gets fed into the international organic supply system, so growing organic food will be more costly.

A Ukrainian harvester in Kharkiv in 2017, before production was effectively stopped - NurPhoto
A Ukrainian harvester in Kharkiv in 2017, before production was effectively stopped - NurPhoto

‘But as far as the UK is concerned, we’ve got months to go before the next harvest, and at the moment there’s still the opportunity for farmers to plant more grain if that’s what they need to do. In the UK they could plant spring crops. The good thing about harvest is that there’s always another one.’

Impact on the UK

So how resilient is the UK food supply in the face of the perfect storm of war in the Ukraine, following on from the disruptions of Covid, and, lest we forget, the looming threat of climate change?

‘The nature of agriculture is always volatile,’ says Wyn Morgan, honorary professor at the University of Sheffield with a specialism in the economics of food.

‘I don’t think what is happening in Ukraine necessarily challenges our fundamentals in terms of food production, but it does in terms of energy. That’s the bigger challenge. And the energy strategy is one that really is going to have to be rethought.

‘It’s that whole interplay of food and energy together, problems in supply chains, labour market shortages – all those things that are causing prices to rise. The question is how long does it take before a spike ceases to be a spike and becomes the norm?’

Morgan says he expects food inflation to rise in the short term from its present level of 5-6 per cent to 8-10 per cent.

‘Affordability for people on low incomes is a real problem, particularly with rising energy prices. You already have this ‘heat or eat’ problem and that will get worse.’

In 2020/2021 approximately 2.5 million people used a food bank in the UK, over 600,000 more than the previous year.

‘Energy prices will persist for some time,’ Morgan says, ‘and food prices will take a while to drop again, so it’s almost inevitable there will be a period where we’ll be seeing a rise in the use of food banks.’

Could Morgan foresee a need for food rationing? ‘I can see energy rationing coming before food rationing. It might be a matter of turn the thermostats down, drive more slowly and so forth. But rationing is such a dramatic intervention I can’t see it, to be perfectly honest.’

The implication that rising energy and commodity prices has for consumers, and for those who actually produce our food is obvious.

When it comes to food costs, Minette Batters, president of the National Union of Farmers, says there is already a disparity between what retailers should realistically be paying to farmers and growers and what they are actually prepared to pay.

‘Farmers and growers work with a very savage retail price war at the moment. Retailers will be focused primarily on providing affordable food and the danger is that they put these inflationary costs back onto the producer. My biggest fear is that short-term the easiest plan for a grower or farmer is to reduce production, because if you’re going to continue producing way beyond the cost of production it’s obviously not viable.’

Retailers paying the real value of British food to producers, she says, will mean everyone involved in the food chain, including shareholders, ‘really being prepared to play their part and retailers looking long and hard at their profit figures.

‘If we put all the risk back onto the primary producer, we’re already seeing growers going out of business. We need to encourage them to take risks, to make those huge investments in these input costs, including energy, whatever form it comes in. These are unprecedented costs. It already costs 50 per cent more to produce a chicken than it did last year. Consumers are not paying 50 per cent more for a chicken. Those prices are not sustainable, and we may well need government intervention to help with these pricing mechanisms in the way they have in the US.’

Batters, who describes food security for the UK as an ‘an absolute moral imperative’, has called for the setting up of a market monitoring core group to examine the food chain in detail, with gas demand and supply a priority. ‘As far as food goes that’s absolutely key. With the right incentives we can produce more on less land – that ability is there. But you’ve got to factor in these price inputs, and we have to make sure farmers don’t decide to contract.’

A glimmer of hope

In a report on food security published last year the UK government identified climate change and other environmental pressures like soil degradation and water quality as the biggest medium to long term risk to domestic production. Wheat yields dropped by 40 per cent in 2020 due to heavy rainfall and droughts at bad times in the growing season. Although they bounced back in 2021, the report notes, ‘this is an indicator of the effect that increasingly unreliable weather patterns may have on future production.’

There is a common perception that viable agricultural land is now being sacrificed for environmental and net zero policies. In January the Government announced plans to restore up to 300,000 hectares of wildlife habitat by 2042, incentivising farmers to create wildlife habitat, planting trees or restoring peat and wetland areas. Events in Ukraine, Batters says, exemplify the need to make food security a priority and rethink this approach.

But this does not mean a zero sum conflict between agricultural imperatives and environmental ones. About 74 per cent of land in the UK is farmland, 63 per cent of which is pastoral (animals) and 37 per cent arable (crops and fruit).

Minette Batters: ‘We need to immediately prioritise food security and food production’ - Heathcliff O'Malley for The Telegraph
Minette Batters: ‘We need to immediately prioritise food security and food production’ - Heathcliff O'Malley for The Telegraph

Farmers play an irreplaceable role in protecting and enhancing our natural environment, and caring for the environment and food production does and should go hand in hand. ‘We’ve always said you’ve got to do both,’ Batters says. ‘A farmed landscape has got to produce a multi-faceted return.’

Batters herself is a tenant farmer on 300 acres of chalk gravel grassland in Wiltshire, raising cattle and sheep. ‘We’ve brought back the lapwing; we’re planting hedges; we’ve brought back harvest mice. There’s no need for any of that to end. In fact we need to do more of it. We need to work within a farm landscape; we need to produce food, we need to produce green energy.

‘We’ve got to prioritise what we use our land for. Building houses on Grade One land – is that in the national interest? We need to take a different approach, immediately prioritise food security and food production and building resilience as being in the national interest. The wake-up call is that food production and food supply are one and the same thing, and you can’t treat them separately.’

In terms of food security for the UK, and for the world, is there a glimmer of hope to be found in what appears to be an overwhelmingly bleak situation.

‘In terms of energy,’ says Waugh, ‘we need to create less dependence on Russia in Europe for energy supplies, and concentrate on ways of generating more renewable energy. That also goes for using renewable energy to produce fertiliser. These new initiatives could be accelerated to create less dependency on fossil fuel and less dependency on Russia at the same time. So there are things that could be accelerated, but they pale in comparison with the human disaster that we are witnessing now. It’s hard to be optimistic about that.’

Asked the same question, Holsether gives an ominously long pause. ‘You could say we are uncovering weaknesses now in the global food system,’ he says. Before we were very much aware of the environmental impact on the food system; now it has too much political risk as well.

‘People are coming together to deal with and make more robust systems for the future but that will take some time. But at the moment I struggle to find anything positive coming out of this, apart from the fact that a large part of the world is coming together in a very strong condemnation of the invasion of Ukraine. That, perhaps, gives us some hope.’

Additional reporting by Ben Farmer and Tanya Kozyreva in Mykolaivka near Odesa