Ukraine War Boosts Need for Food Aid

MT. JULIET, Tenn. (DTN) -- The war in Ukraine has altered trade, production and consumption patterns so significantly that global commodity prices will keep rising in 2022 and remain at high levels through the end of 2024, according to a commodity outlook from the World Bank.

It projects global corn prices to average 20% higher in 2022 and decline 10% in 2023. Wheat is expected to rise 43% in 2022 before declining 16% in 2023. Energy prices are expected to rise more than 50% this year before easing in 2023 and 2024.

If the war is prolonged, the prices could go even higher or become more volatile.

"Overall, this amounts to the largest commodity shock we've experienced since the 1970s. As was the case then, the shock is being aggravated by a surge in restrictions in trade of food, fuel and fertilizers," said Indermit Gill, the World Bank's vice president for equitable growth, finance, and institutions, in a news release. The World Bank is an international organization that attempts to fight poverty by offering financial assistance to middle- and low-income countries.

The report argues there are two reasons why this commodity price shock will be different than previous ones. The first is that there are fewer substitutes for the most affected energy commodities because price increases have been broad-based across all fuels.

Second, the price increases of some commodities are driving up prices of other commodities, like higher natural gas prices raising fertilizer prices and putting upward pressure on agricultural prices. Global fertilizer expenses surged 80% last year on supply disruptions, soaring input costs and trade restriction in China and Russia. The World Bank projects fertilizer prices to rise almost 70% in 2022 before easing some in 2023.

"Commodity markets are under tremendous pressure, with some commodity prices reaching all-time highs in nominal terms," said John Baffes, senior economist in the World Bank's Prospects Group, in a news release. "This will have lasting knock-on effects. The sharp rise in input prices, such as energy and fertilizers, could lead to a reduction in food production particularly in developing economies. Lower input use will weigh on food production and quality, affecting food availability, rural incomes, and the livelihoods of the poor."

The U.S. Agency for International Development (USAID) and USDA expect the war to exacerbate global food insecurity by pushing an additional 40 million people into poverty around the world. That's why the agencies announced on April 27 they intend to use the full balance of the Bill Emerson Humanitarian Trust -- $670 million -- to provide food assistance. It's the first time the U.S. has used the emergency funding authority since 2014. For more on the food security risks in Ukraine, please read "Ukraine War Leading to a 'Perfect Storm' for Global Hunger Risks" here: https://www.dtnpf.com/….

USAID will use $282 million from the trust to procure U.S. food commodities to bolster existing emergency food operations in six countries facing severe food insecurity: Ethiopia, Kenya, Somalia, Sudan, South Sudan, and Yemen. USDA will provide $388 million in additional funding through the Commodity Credit Corporation (CCC) to cover ocean freight transportation, inland transport, internal transport, shipping and handling, and other associated costs.

"In Ukraine, which provides 10% of the world's wheat, farmers are struggling to plant and harvest their crops for fear of shelling and Russian landmines, and their path to exporting these vital commodities is severely restricted by Russia's invasion, which caused the closure of Ukraine's ports," said USAID Administrator Samantha Power. "Putin's decision to wage a senseless and brutal war against a peaceful neighbor is leading to a staggering global food crisis. Today's drawdown of the Bill Emerson Humanitarian Trust will help us respond to the unprecedented needs in countries around the world that are facing historic food insecurity."

You can read the World Bank's report here: https://openknowledge.worldbank.org/….

Katie Dehlinger can be reached at katie.dehlinger@dtn.com

Follow her on Twitter at @KatieD_DTN

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