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Todd Crawford
May 24, 2022
The executive director of the United Nations World Food Programme, David Beasly, on the sidelines of this year’s World Economic Forum (WEF) meeting in Davos, Switzerland said compounding crises are resulting in a “hellstorm on earth.”
In conversation with the BBC’s economics editor, Faisal Islam, while citing Russia’s aggression in Ukraine Beasly said, “When you take 400 million people that are fed by the food that comes out of Ukraine and you shut that off, and then you add on top of that fertilizer problems, droughts, food costs, fuel costs, we’re looking at a hellstorm on earth.”
The comments come as the world faces its worst food crisis since World War II that was already showing signs of emerging prior to Russia’s invasion of Ukraine largely due to supply chain disruptions as a result of measures enacted by numerous governments to address the COVID-19 pandemic.
Countries, grappling with domestic scarcity, have begun to curb exports of food which threatens to deepen the looming crisis.
Countries begin implementing export curbs
Malaysia is the most recent country to announce a curb on food exports. On May 23, Malaysian authorities met to discuss curbing chicken exports amidst fears of domestic scarcity and allegations of cartel pricing.
It was decided that the country will halt exports of 3.6 million chickens a month beginning on June 1.
The decision is likely to hit Singapore the hardest. Singapore sources approximately a third of its supply of chicken from Malaysia. Other countries likely to feel the impact include Thailand, Brunei, Japan and the city of Hong Kong.
Malaysia joins a growing list of countries implementing restrictions on food exports. Wheat prices shot up on May 14 following an announcement from Indian authorities that the country would prohibit wheat exports. India is the world’s second largest producer of wheat however this year’s harvest has been called into question following an early season heatwave that blanketed the country in temperatures in excess of 40°C (104° F) for weeks on end.
Global buyers were relying on India’s wheat to potentially fill a hole left by an expected decline in exports from the Black Sea region while other global breadbaskets, like the U.S.’s Great Plains, grapple with historic drought levels which are threatening the region’s wheat harvest.
India has provided a caveat saying that it will still allow exports of wheat for letters of credit that have already been issued, and, on request, it will consider exporting to countries “to meet their food security needs.”
Indonesia’s ban on palm oil exports has global consequences
According to data compiled by the Food and Agriculture Organization of the United Nations, the cost of edible oils rose an astonishing 250 percent above standard price levels.
As edible oil prices skyrocketed the Indonesian government sought effective domestic measures to protect consumers. Initially the country implemented a price cap on palm oil and imposed a limit of two liters per customer. Not seeing a desired outcome the country then increased the levy on palm oil exports and offered direct cash transfers to low-income citizens to subsidize purchases. None of these strategies worked.
For palm oil producers, selling their product on the global market is much more lucrative and the sector, consisting of just a handful of companies, realized high profits as international prices rose.
However, as more and more of their oil was exported it created a bottleneck in the domestic supply chain prompting a wave of protests in mid-April of this year.
Following high demand for domestic edible oil during the Muslim celebration of Eid al-Fitr the country decided to ban the export of crude and refined palm oil.
While the ban was welcomed domestically numerous countries were caught off guard by the ban including India, Pakistan, Bangladesh and Egypt.
North American and European markets rarely use palm oil directly however many processed products contain it and a lack of the ingredient may impact the production of several items including shower gel, dish soap, lipstick, instant noodles and packaged bread.
The ban is expected to impact the cost of other processed goods like Oreos, Nutella, Doritos and even Coca-Cola. While in the west consumers can expect to pay more for their snacks, low-income countries are expected to feel the most impact, threatening to exacerbate an already dire situation.
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