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Wednesday, December 28, 2022

Year 2023 – Food Crisis To Worsen As Fertilizer Shortage, High Price, Inflation, Interest Rate Hikes Continue





Year 2023 – Food Crisis To Worsen As Fertilizer Shortage, High Price, Inflation, Interest Rate Hikes Continue



Supply chain shortages and the rising cost of doing business, as well as drought and interest rate hikes are some of the factors that contributed to food crisis this year. But if you think food shortages and high prices will magically disappear next year, think again. American farmers believe 2023 could be even worse, after a difficult 2022 as the same problems continue to hit the world next year.



Climate change and the ongoing Russia-Ukraine war are just some of the reasons why food shortages will likely continue in 2023. Many thought the war was the only reason we are plagued with food crisis. On Feb 2, before the invasion, Russia banned the export of ammonium nitrate to ensure affordable supplies for domestic farmers.



Russia exports two-thirds of the world’s ammonium nitrate, which is used in fertilizers to improve yields for crops like wheat, corn and cotton. Worse, natural gas is the main ingredient of fertilizer. Therefore, farmers who could not afford the increase in costs of fertilizers have seen lower crop production, which in turn will hit global food security.



It didn’t help that Russia is one of the biggest oil and gas producers in the world. The best part is Ukraine is a critical route for oil that flows into Eastern Europe and subsequently to all the European Union countries. Like it or not, Russia’s attack on Ukraine is not only about oil and gas, but also the entire supply chain of other commodities that threaten global food prices.



But the biggest nightmare was the supply-chain disruptions that spread across the global economy. Both Russia and Ukraine are huge producers of agricultural products like wheat, barley, grains and rye that are badly needed by Europe. And because 71% of its land is agricultural, Ukraine is considered the “breadbasket” of Europe. Ukraine is the fifth largest exporter of wheat – 7% of global sales.



However, the shortage of fertilizer did not happen overnight after Russian president Vladimir Putin launched the “special military operation”. The fertilizer crisis has been steadily growing since 2021 – before the Ukraine War – when the World Bank reported a 66% increase in the price of fertilizer thanks to shortages. And the issue is likely to persist throughout 2023, according to the Food and Agriculture Organization (FAO).



The Russia-Ukraine War simply makes it more challenging to procure the agricultural commodities as fertilizers and the compounds used to make them become increasingly more expensive. This has led to inflation. In fact, food prices have been outpacing overall inflation in 2022 as November food prices showed a 10.6% increase compared to inflation of 7.1% in the same month.



Adding salt to the wound, the U.S. Federal Reserve’s aggressive interest rate hikes from as low as 0% to as high as 4.25% are hurting farmers. Because most American farmers depend on short-term loans every year to pay for basically everything, from seeds to fertilizer and from livestock to machinery, the increase in interest rates has raised the cost of farm operations.




According to the U.S. Department of Agriculture, the farming sector’s total interest expense alone is projected to hit US$26.5 billion this year – nearly 32% higher than in 2021. The higher costs of fertilizer, fuel and land cost are forcing farmers to decide whether to reduce their crops and cattle or to struggle with higher loan repayment, which again contribute to shortages of food.



China, in line with its “Covid-Zero” policy, has basically restricted its markets for exports such as the phosphate used to create fertilizer – further worsening the food crisis. Fertilizer accounts for between 35% and 36% of farmers’ costs when cultivating core crops such as wheat and corn. The price volatility obviously affects global food security.



A report released by consulting firm McKinsey said next year may be worse as it estimated that crop production in Ukraine will decline by 35% to 45% in the next harvesting season, which started in July. As a result, many bakeries and factories may struggle to obtain the necessary ingredients to make bread, leading to a potential shortage in 2023.



Essentially, this year’s food crisis is mostly due to a logistical disruption tied to issues in shipping Ukrainian and Russian grains out of the countries. Next year, however, the food supply itself could be in trouble – particularly in Ukraine. The deal brokered by the United Nations and Turkey that allows Ukraine to restart grain exports out of the Black Sea could be interrupted anytime if the conflict escalates.



The aluminium shortage, which started in 2020, and the labour shortages due to Covid-19 pandemic also mean canned food, pet food, beer and other beverages will continue to be expensive. Already, from the United Kingdom to Malaysia, some supermarkets have reported shortages of eggs as it costs more to feed and raise chickens.



Interestingly, in 2017, humanitarian organization Oxfam has predicted the world will run out of food around 2050 when a growing world population exceeds food growing capacity. According to the study, climate change, crop failures, and a rise in food prices for items like corn and rice will also contribute to the world’s population outpacing the amount of food it produces.



However, Gro Intelligence, an agricultural data technology company, said the world’s agricultural system will not produce enough food to feed everyone in the world by 2023 – that’s next year! Both studies done in 2017 did not take into account a conflict as serious as Russia-Ukraine War. The UN World Food Programme (WFP) has warned that severely hungry people around the world have jumped from 282 million to 345 million in 2022.




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kt comments:

Time to rethink about growing tapioca, one of the easiest root food to cultivate. Down in Oz and nearby Pacific islands, it's known as cassava. All one has to do is to strike into the ground a snapped-off branch of the plant and that will grow easily and very fast. 







But there seems to be a bias against tapioca. People of my (late) mum's peerage frown upon tapioca as a stable food, only considering the crop as just good for baking Kueh Bengka (baked tapioca cake).


Yummy Kueh Bengka (baked tapioca cake)


I suspect she and mateys associate tapioca with the horrendous hardship of the WWII Jap occupation of our country.

Mind, my sar-hor-fun chef in the Ayer Itam market uses (used to anyway) tapioca power as a gravy thickener. And I like tapioca and used to eat its younger roots raw - it was sweet and crunchy.


Yummy sar-hor-fun


Alas, times may change soon so tapioca may come back into popularity (or necessity) as it did during my mum's days during the Japanese occupation of Malaya.


3 comments:

  1. Also known as kuih bengkang locally

    ReplyDelete
  2. The premise of endlessly progressing Globalisation, where goods can be reliably sourced from anywhere that is most cost efficient, and can be seamlessly shipped to anywhere in the world is fast crashing in flames.
    The initial period of the Covid-19 crisis showed how nations can and will engage in product nationalism where they perceive they may have a domestic shortage. Simple healthcare consumables such as disposable masks and PPE became banned or severely for export.

    Later on came vaccine nationalism, broken supply-demand for everything from grain to electronic gadgets.

    Then came the Russian invasion of Ukraine.

    ReplyDelete
  3. "The premise of endlessly progressing Globalisation, where goods can be reliably sourced from anywhere that is most cost efficient, and can be seamlessly shipped to anywhere in the world is fast crashing in flames."

    That all begin and totally due to US of A who is determined to be and remain as the world one and only superpower.

    Before WWII, US colonized and robbed the poor and undeveloped nations. After WWII US with their ill-gotten wealth managed to advance themselves and again colonized the poor and undeveloped nations by their early developed status through "rent-seeking" a.k.a. "capital investment".

    After the cold war, US use their superiority in their military forces to intimate every other nations to submit to their demands. US prevent and control every other nations advancement whether wealth or technologies etc so that US can enjoy the fruits while other nations do the sweat and blood labour.

    They schemed to keep the African poor while stealing their resources.

    They alleged falsely the Chinese eat too much meat that cost the depletion of fish supply and environmental degradation because raising pigs, chickens and cows means increased emissions of the greenhouse gases causing climate change.

    When China joined Europe in the development of Galileo, US pressured the European to kick China out of the team. In the end China has to do their own development of the Beidou alone, pure Chinese technology which turn out far more sophisticated than the US GPS.

    When Japan grew into the world 2nd largest economy and threaten to overtake US, US came out with the evil scheme of Plaza Accord and impeded the Japanese growth and thus the famous quote of The Japanese Loss of the past 2 decades, . . . . 3 decades, and now going into the 4th decades.

    When the Japanese semi-conductors industry was far ahead of the US, US just fixed up, arrested and jailed the Toshiba executives and usurped Toshiba office and forces Toshiba to surrender the semi-conductors business to US.

    When France company Alstom's nuclear power plants technology was better than the US, US came out with the evil plan and arrested and fixed up Alstom's former executive Frédéric Pierucci and end up with US company GE taking over Alstom's nuclear power plants business.

    When China economy threaten to overtake US, Donald Trump started the trade war with China, when that failed, DT try to impede China technologies by sanctioning many Chinese technology companies.

    US tried to do an Alstom on China Huawei through Canada arresting Huawei executive Sabrina Meng. When that failed to work, DT unleashed the Covid in Wuhan through the then military games. But alas, as they say the rest is history, US of A failed again, miserably.

    ReplyDelete