Page 24 - TURKRptJun22

24 I Companies & Markets bne June 2022
As such, the report called for more domestic wheat production using less fertiliser, less speculation on the markets and more effort to reduce poorer countries' reliance on wheat imports from distant markets, such as Russia and Ukraine.
Exposed countries
Turkey and most of the Middle East and North Africa are dependent on imports of many foods from Russia and Ukraine – especially for cereals and vegetable seeds/oils. Asia, Africa and Central Europe sit somewhere in between, according to Capital Economics.
“We estimate that imports from Russia and Ukraine account for 20-30% of domestic wheat supplies in Turkey, Indonesia and parts of Africa and 40-50% in Egypt, the UAE and Tunisia. Imports of sunflower seeds/oil account for 30% of domestic supplies in Turkey, Poland, China and Korea, 60% in MENA and more than 70% in Tunisia, India and Malaysia. Other vulnerabilities include soybeans (Turkey and Poland), corn (Tunisia) and cocoa products (the UAE),” said Capital Economics’ Liam Peach.
Egypt sources 15% of its needs as imports, but in very large volumes. It has been desperately looking new suppliers in the last month, but without luck, and the authorities say it now only has three months of reserves left.
Ways out
Efforts to grow more wheat elsewhere replace Russian and Ukraine supplies are being made. India, for example, India has boosted exports of wheat to meet demand.
India exported a record 7.85mn tonnes of wheat in the year to March, up 275% on the previous year, taking advantage of rising wheat prices after Russia invaded Ukraine.
However, the country’s heatwave since mid-March has cut crop yields, the London-based Energy and Climate Intelligence Unit warned.
“Millions of people could be severely affected by the heatwave in India – another sign of the growing human cost of extreme weather. India might have stepped in to fill some of the global gap in wheat production caused by the invasion of Ukraine. But the new normal of extreme weather could put paid to that in India and other places around the world. Climate change will make this far worse in coming years and decades,” said Matt Williams, climate and land programme lead at the Energy and Climate Intelligence Unit (ECIU).
This is a prime example of how food production and indeed food security in the developing world is vulnerable to climate change, a situation that the current war is intensifying.
One irony is that agriculture itself is one contributor to climate change, with 23% of all global greenhouse gases (GHGs) coming from farming, loss of forests, and other land-use changes.
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Without changes, emissions from the food system could increase by 30-40% by 2050, reducing the chances of keeping temperature rises to 1.5C, the ECIU said in a briefing.
While contributing significantly to climate change, food production and food supply chains are also at increasing risk from its most damaging impacts, with farmers deemed as one of the most vulnerable groups to climate change.
By 2050 harvests of staple crops in eight countries – Angola, Lesotho, Malawi, Mozambique, Rwanda, Uganda, Zambia and Zimbabwe – could fall by 80% due to climate change, forcing farmers to switch to different types of crop, the International Fund for Agricultural Development (IFAD) warned ahead of COP26 in November 2021.
Farming practices
But efforts to boost production globally have been hampered by shortages of chemical fertiliser. Russia and Belarus produced 40% of international potash exports in 2021
and that trade has also been hit by the war.
Fertiliser are now at their highest since the global commodity bubble in 2008, with the cost of nitrogen fertilisers rising by 253% in Europe in 2021.
This cannot be attributed exclusively to the Ukraine crisis – tensions over Ukraine did not begin to peak until late 2021. But they have continued to climb in proportion to the growing forces amassed on the border.
If farmers don’t use fertiliser, they will see their yields fall; if they do use fertiliser, they will have to pass through input costs. Either way, the pressure on agriculture prices will accelerate, warned Les Nemethy CEO and founder of Euro- Phoenix Financial Advisors.
Rising prices
Rising prices for wheat is also pushing up inflation in many importing countries. The EBRD warned this week that inflation soared to 11.9% in March, the month after the invasion, which is close to the peak recorded during the international financial crisis in late 2008.
“Prices of wheat, corn, soybeans and other agricultural commodities have also risen rapidly,” the EBRD says.
“Many economies in the EBRD regions are highly dependent on gas in their energy mix, while some economies in the Caucasus and southern and eastern Mediterranean rely heavily on wheat imports,” the bank said in its Regional Economic Prospects report.
The EBRD also warned that North Africa was facing major threats to its food supply, as they are the world’s biggest importers of grain.
Egypt is particularly exposed to the Russo-Ukraine war, as