OODALoop: Rice and Fertilizer are the Linchpins of Global Food Insecurity
Recent restrictions on rice exports by India prompt this analysis of the on the ground conditions of global food insecurity, returning to some of the themes we explored in The Future of Food (In)Security and Agriculture Cybersecurity: Grain Hoarding, Rice Shortages and the War in Ukraine. In 2024, we are on the lookout for technological and geopolitical convergences. Global rice supplies and fertilizer access in war torn countries are just such a convergence.
World’s Poor Face Even Pricier Rice If India Extends Export Curbs
“Rice-importing countries in sub-Saharan Africa have felt the greatest impacts, scrambling to find alternative sources…”
From Bloomberg last week: India’s restrictions on rice exports have already sent ripples around the world. Those curbs may now be extended, threatening to keep food inflation in many countries higher for longer. The world’s top shipper started restricting sales of key varieties last year to help keep local food prices in check ahead of national elections. The impact of existing measures is evident in the high cost of the staple that’s vital to the diets of billions of people in Asia and Africa — home to some of the world’s poorest countries. Benchmark Asian prices are near a 15-year high. India’s exports of the grain to its major markets have slumped from usual levels, especially in sub-Saharan Africa, according to recent analysis from the International Food Policy Research Institute.
For example, in the four months through November, India’s exports to West Africa slid some 54% from a year earlier. Shipments to East Africa and Central Africa dropped 58% and 80%, respectively, the Washington-based IFPRI said in a note. “Rice-importing countries in sub-Saharan Africa have felt the greatest impacts, scrambling to find alternative sources,” said the note’s authors Joe Glauber and Abdullah Mamun.
About half of the global population relies on rice for daily diets. The key question now is how long India’s export curbs will remain in place. If exports continue at their current sluggish pace beyond India’s elections in the coming months, it will likely result in higher prices and more pressure on rice-importing nations, the IFPRI warns.
India’s Strained Farmlands Are a Threat to Global Food Supply
“…restrictions have tempered cost increases at home, but they’ve hurt vulnerable importing nations, pushing the global price to a 15-year high and raising the possibility of social unrest in reliant regions such as Africa.”
Back in November, Bloomberg provided a detailed report of the on the ground conditions in India India’s farm sector is fraying. That’s bad news for its 1.4 billion people, for tens of millions of cultivators, for a government seeking reelection — and for global food supplies. The world’s most populous nation is today a leading producer of rice, wheat, milk, sugar and more. But its agricultural sector still leans heavily on ill-equipped smallholders. Farm plots have been shrinking for decades, infrastructure remains rickety and climate change is only bringing more disruption.
The South Asian nation still lags China in yields for major crops, even though the government has more than doubled farmer subsidies over roughly the past decade. The most significant effort to tackle this underperformance, effectively by deregulating internal markets, sparked many months of dramatic demonstrations by farmers in 2020 and 2021 — the worst protests of Prime Minister Narendra Modi’s near decade-long tenure. The crisis reflected a rushed, poorly handled legislative process but also the tangle created by decades of distorting subsidies. That’s turning into a growing headache as India — either unable or unwilling to tackle its structural problems — limits exports to curb food inflation and appease the electorate. Farmers and overseas buyers pay the price.
Take rice:
- India’s production has surged over the past decade, accounting for about 40% of worldwide shipments before the latest limits, broadly equivalent to the next four exporters combined.
- Now, restrictions have tempered cost increases at home, but they’ve hurt vulnerable importing nations, pushing the global price to a 15-year high and raising the possibility of social unrest in reliant regions such as Africa.
- Domestic producers again lost out, too.
- The farming sector — and cultivators’ lives — were transformed by the green revolution that started in the late 1960s. But the industry continues to reflect priorities of that period.
- Subsidies still focus on the production of staples such as wheat and rice rather than the crops needed for balanced nutrition or that command higher returns for farmers.
- Too little attention is paid to land degradation, the unsustainable application of fertilizers and pesticides, and an overuse of groundwater.
- Until India can unpick its subsidies, resolve structural issues like insurance access and invest more significantly in research and development, farming in the country will remain a gamble in which the odds are stacked against cultivators.
Productivity will continue to lag. Governments will turn again to export limits to dampen prices, as they have this year for rice. Neither India nor the world can afford that.
From the Ground Up: Demining Farmland and Improving Access to Fertilizer to Restore Ukraine’s Agricultural Production
Researchers and experts from the Center for Strategic and International Studies (CSIS) have done great work here:
CSIS and Ukrainian experts examine two aspects of Ukraine’s agricultural recovery that are critical to increasing its food production and exports: demining farmland and restoring farmers’ access to fertilizers.
A quantitative analysis the introduction to the report:
“In the two decades leading up to Russia’s February 2022 invasion, Ukraine had become a major producer and exporter of numerous agricultural commodities. In the 2020–2021 harvest season—the last season unaffected by Russia’s full-scale invasion—Ukraine was the fifth-largest exporter of wheat, honey, and walnuts worldwide; the third-largest exporter of maize, barley, and rapeseed; and the world’s top exporter of sunflower oil, sunflower meal, and millet.
Due to Russia’s intentional attacks on all aspects of Ukraine’s agriculture sector, and collateral damage from hostilities, Ukraine’s production and exports are diminished today from prewar levels. As of June 2023, the Kyiv School of Economics estimated that Ukraine’s agriculture sector had incurred $8.7 billion in direct damages to agricultural machinery, equipment, and storage facilities, as well as from stolen or damaged agricultural inputs, such as fertilizers and seeds, and outputs, such as crops and livestock. The sector’s $40.3 billion losses represent farmers’ diminished incomes due to foregone production, lower selling prices for products, and higher operational costs across all stages of the agri-food value chain.”
Policy Upshots
Demining Ukraine’s farmland and increasing access to fertilizers are vital to Ukraine’s agricultural recovery—which is necessary to bolster Ukraine’s economy during wartime, restore its capacity as a major global food supplier, and counter the influence Russia wields through its own agricultural exports.
- The presence, or even the fear, of landmines on agricultural land has affected farmers’ harvests across Ukraine. At the same time, the process of demining farmland could also depress agricultural yields, as some farmers may experience long-term impacts once their land has been demined.
- As Ukraine’s trade relationships with two of the world’s largest fertilizers producers—Russia and Belarus—are now severed, Ukraine’s government and agricultural enterprises are struggling to identify alternative sources to fill the considerable supply gap left by foregone Russian and Belarusian imports.
- As urgent needs—related to agriculture and all sectors affected by the war—occupy the attention of Ukraine and its international partners, they should not lose focus on a resource central to Ukraine’s rise as a global agricultural powerhouse: its black soils.
- Rebuilding Ukraine’s agriculture sector from the ground up must involve identifying the optimal set of soil testing methods for Ukraine’s agricultural soils and scaling up a national infrastructure for such testing within Ukraine in the face of numerous, concurrent challenges imposed by Russia’s war.
For the full CSIS report, go to this link.
The Fertilizer Institute (TFI): Fertilizer Market Overview and Challenges
“…a combination of events over the last two years have resulted in fertilizer input cost increases.”
The TFI has made available the one page Executive Summary of the complete text in response to the U.S. Department of Agriculture’s Request for Information on Competitiveness in the fertilizer industry:
Issue Summary: Fertilizer is responsible for 50% of crop yields, hence its critical role in world food security. A confluence of factors has negatively impacted fertilizer markets, which are global. These challenges have constrained supply, shifted trade flows, and increased the cost that farmers pay for this essential crop input.
Issue Background: Fertilizer is a globally traded commodity that is influenced by global supply and demand factors, as well as domestic conditions. Because fertilizer is resource-dependent, relying for example on natural gas and mineral deposits of potash and phosphate, only about 65 nations have the resources necessary for its production. Competition here at home is significant: the United States is one of only three nations with 20 or more unique producers of fertilizer. We also import many types of fertilizers in significant volumes. Because the fertilizer industry is globally intertwined supply disruptions caused by increasing energy prices, foreign trade policies and geopolitical events (Belarus, China, Russia-Ukraine) can affect price and supply conditions in the United States. Consequently, a combination of events over the last two years have resulted in fertilizer input cost increases.
Key Factors: The following key factors are influencing fertilizer markets –
- Resource dependent: Only about 65 nations have the resources to produce fertilizer.
- Domestic competition: The United States is one of only three nations with 20 or more unique producers of fertilizers.
- Capital intensive: Fertilizer production facilities cost $1 billion to $4 billion to build.
- Global demand: As farmers increase crop production to capture additional revenue from high or increasing crop prices, additional acreage is brought into production, and this raises the demand for fertilizer.
- Global supply disruptions: Sanctions, export restrictions, and other factors have drastically impacted major global producers and suppliers in Belarus, China, Russia-Ukraine, and much of Europe.
- Production costs: Natural gas accounts for 70% to 90% of total ammonia production costs. Natural gas prices doubled in the United States in 2021.
- Logistical supply chain: Shipping costs have been rising for many years. Poor rail service is also raising costs and further constraining the entire modal supply chain. The vaccine mandate on transporters of essential commerce has also raised costs and constrained supply on the U.S.-Canadian border.
A more detailed overview of the fertilizer business and factors impacting it is available from TFI’s comments responding to the U.S. Department of Agriculture’s (USDA) request for information on “Fertilizer Access.”