The butterfly and the storm: Last week Indonesia announced a temporary ban on palm oil exports. The cause is about ten thousand kilometers away, in Ukraine. There, the export of sunflower oil, of which it is one of the most important producers in the world, has collapsed due to the war. Large companies have switched to palm oil, of which there is now also a shortage. And Indonesia is one of the largest producers of that in the world.
The war in Ukraine, for example, reverberates in every corner of the world, and has unexpected effects on the sophisticated network of production and exports created by globalization. This does not only apply to gas and computer chips, but also to an elementary necessity of life such as food. The emptying of grain silos and other storage by Russian soldiers in Ukraine, which has recently been reported, can in that sense be interpreted as turning off the gas tap. It amplifies the upward price effect and makes the trump cards that the Kremlin believes it has in their hands all the more valuable. Until the rest of the world has adapted to the new situation, and Russia is ultimately only poorer because of it.
It’s not that far yet. While in the Netherlands attention is, understandably, concentrated on the phenomenal price increase of energy, food is also becoming less affordable here. Foods were already 6.2 percent more expensive in March compared to last year. It can be concluded from provisional figures for April that the price increase was probably even greater in that month. The price increase of unprocessed foods, about which there are already separate data, already rose by more than 11 percent from 7 percent in March to 11 percent in April.
This mainly affects the lower incomes, who spend a relatively large part of their budget on daily needs. It also provides perspective on what is happening in poorer countries, where not only an even larger share of income is spent on food, but where a relatively large amount of unprocessed product (rice, grain, vegetables) is also consumed. The price effects of these are usually much greater than those of processed foods.
The situation was already bad in low-income countries. According to the World Food Programme, a United Nations aid agency, 811 million people go to bed every night without having enough to eat. Of these, 276 million are at risk of acute malnutrition – double the number before the pandemic. Covid, local conflicts and the changing climate have disrupted or are disrupting global food supplies. The war in Ukraine is on top of that. The export of wheat or sunflower oil from that region has been severely affected. Because the price of energy and fertilizer has also risen sharply, problems with cultivation and transport are increasing the pressure.
The CEO of food and care group Unilever said last month that the company has already raised prices in Europe by an average of 5 percent, but in emerging countries even by ‘double digits’. That doesn’t bode well, especially because in a direct sense little can be done about food scarcity – other than the urgent help that is desperately needed and must certainly be provided. The biggest task is for the longer term: global political stability, limiting global warming and deep cooperation to tackle problems. Those are international public goods. So is food security for everyone.
A version of this article also appeared in the newspaper of May 3, 2022