Focus: Effects of the global food and fuel crisis on food prices and market functionality
Almost five months into the Ukraine conflict, the war and ensuing sanctions imposed on Russia have major implications on global food and energy markets as both countries are significant exporters of grains (especially wheat and barley), agricultural fertilizers (such as potassium, nitrogen, phosphorus); and Russia is a major global producer and exporter of crude oil and natural gas. According to a recent World Bank report, the conflict has altered global patterns of trade, production, and consumption to the effect that prices are anticipated to remain at historically high levels until the end of 2024, aggravating food insecurity and inflation.
Along similar lines, global fertilizer prices have doubled since 2021 and will likely have a ‘profound impact’ on food production around the world in 2023. Climate-induced threats are likely to further exacerbate global food output. To shield themselves from negative impacts and secure domestic food security, 25 countries have instigated export restrictions and food bans as of June 2022, affecting around 8% of the global food trade. Moreover,
Russia’s ongoing blockade of 20 million tons of grain ready to be exported from Ukraine has further compounded this situation.
The conflict is predicted to adversely affect 1.7 billion people in 107 countries with the number of acutely food insecure people increasing to 345 million by June 2022. Overall, an estimated 670 million people will remain hungry by 2030, which is equivalent to the baseline situation in 2015, and far off the targets set by the SDGs.
G7 leaders recently pledged $4.5 billion toward ensuring global food security.
This does not happen in isolation. COVID-19-induced negative impacts on household income and demand have resulted in global supply chain bottlenecks, rising inflation, and record debt in many countries – which, in turn, has disrupted the economic recovery from the pandemic.
Government action has been limited by reduced foreign exchange reserves and existing high domestic inflation in several countries (91% LIC, 89% LMIC, 68% HIC).
In the Asia Pacific, Cambodia is among the countries most exposed to rising energy prices owing to its comparatively high net fuel imports relative to GDP, limited domestic access to electricity, and reliance on fossil fuels. In fact, soaring oil prices coupled with a cyclical economic slowdown in the US and China, Cambodia’s largest trading partners, are key factors affecting economic growth in Cambodia, which is projected at 4.5% for 2022.
To understand how these shocks are impacting food availability and access to markets in Cambodia, the World Food Programme (WFP) together with the Agricultural Marketing Office (AMO) monitors the retail and wholesale prices of key food commodities in 45 urban and rural markets across the country (see Methods section).
An average of around 250 traders and market chiefs are called every two weeks. Market chiefs are also interviewed to assess market functionality, including supply and demand issues.
Source: World Food Programme