How the Ukraine crisis may affect the food chain transition

2 Sep 2022

From supply issues to price surges, the impacts of the Russo-Ukrainian war on the global food value chain are significant. What pain points has this crisis exposed, and what should the response be?

Global hunger and food insecurity are rising. Since the pandemic kicked off in 2020, the number of severely food-insecure people has doubled to over 232 million. And it does not stop there. This number is growing and by year-end will have reached 276 million, the UN’s World Food Programme (WFP) predicts.

How the Ukraine crisis may affect the food chain transition
© AdobeStock/xartproduction

The Russo-Ukrainian conflict is only exacerbating this, creating considerable short-term instability, and threatening the resilience of the global food system. Seven months into the war, certain consequences are already clear: global prices of agricultural and food commodities have soared, exports from Russia and Ukraine have slowed, future harvests rest in the balance, and the worst affected countries are struggling to adequately feed their people.

The war has exposed pain points in the food system transition and has significantly impacted the food value chain, Harry Smit, senior analyst, Farm Inputs team at RaboResearch pointed out at F&A Next 2022.

What truths has this crisis brought to light about the global food system and what steps must industry stakeholders take moving forward?

Technology is revolutionising the agriculture industry

One of the oldest existing industries, the agriculture sector has radically transformed over the past half decade. Advances in agricultural processes and machinery have vastly broadened the amount of land we can cultivate, at much faster speeds and greater yields.

Today, technology is disrupting the agriculture industry and pushing it into another revolution, which could see new processes further expanding the speed, scale, and productivity of farms. If connectivity is successful, the industry could bring in an additional $500 billion to the global GDP by 2030, McKinsey research shows.

According to Smit, as technology continues to progress, the agriculture industry will advance further and eventually provide solutions to problems affecting the global food chain. “Today’s transition has to provide benefits, not only to the operator, but also has to meet broader societal goals,” he said.

Billions of people rely on Russian exports

Ukraine and Russia account for 29% of global wheat exports and 62% of sunflower oil, according to estimates by the World Bank. Around 35% of the world’s population relies on wheat as the primary staple in their diet. As of March 2022, the price of wheat on global markets had risen 50% compared to the previous month, and almost 80% compared to the same time last year.

It is no surprise then that the impact of the war on the food value chain has already been felt across the globe, from smallholder farmers in conflicted areas to large multinational manufacturers and suppliers.

A top three global exporter of gas and oil, Russia is also a core player in global energy markets. The conflict has led to rises in the prices of natural gas from around €20 to €100 per megawatt, a tripling of the price of phosphates and phosphides, and a doubling of the price of rapeseed, Smit explained.

This, along with cost-price inflation and the higher cost of agri-commodities has placed unrivalled pressure on the food value chain.

© AdobeStock_unikyluckk_303821775© AdobeStock/unikyluckk

Could the crisis benefit the global food value chain?

The Ukraine crisis has revealed cracks in global supply chains which have in some parts accelerated, and in others stalled the food value chain transition. Looking at consumption patterns for example, increases in the prices of products and ingredients has caused the price of resource intensive products to rise significantly. While negative for the consumer, this change may help farmers to shift less resource intensive products.

A similar counterbalance may be found when it comes to food production. “Moving towards a tripolar world will put pressure on the optimization of resources but may also help to create a more circular system overall,” Smit said.

While for global supply chains, the hope is that the war will foster a growing interest in securing supply and nurturing cooperation and longer-term relationships moving forward, which previously have provided the basis for more collaborative and efficient supply chains.

“[The world] requires a future proof food system which is resilient, feeds the world sustainably, and is inclusive,” Smit said.

How can we build a resilient and sustainable food system?

The question of how we get to that point is an important one. According to Smit, the answers can be found in developing better technology, making more informed decisions, and fostering innovation.

When it comes to technology in the agriculture space, Smit believes that more resource efficiency is needed to increase productivity per nutrient or square metre. Processes and machinery that are energy intensive and stimulate demand for fossil fuels should be replaced by more sustainable, efficient means such as precision agriculture and other alternative crop technologies.

While better decisions mean those which are “more granular … more dynamic … and of a broader scope, both in terms of the optimization of yields and other societal goals,” Smit said.

“By using more technology and incorporating changing variables that are external to agricultural practices, such as the price of certain goods [in the agriculture industry], we can do much more, in a more efficient way. To do this, we need more data. [This means] farmers may have to give up some autonomy and trust the decision-making abilities of new technologies.”

Related categories

Related tags

Blogs Market News

Related news

NutriScore algorithm update a ‘step in right direction’

NutriScore algorithm update a ‘step in right direction’

7 Sep 2022

Campaigning organisation Foodwatch International is hailing the update to the NutriScore algorithm as a “step in the right direction” but says there is still space for further improvement.

Read more 
Are new WHO sweeteners guidelines ‘a disservice’ to public health?

Are new WHO sweeteners guidelines ‘a disservice’ to public health?

6 Sep 2022

New draft recommendations from the World Health Organization (WHO) warn that zero-calorie sweeteners should not be used to help weight control or reduce the risk of noncommunicable diseases’ (NCDs) – sparking mixed reactions from industry groups.

Read more 
Canadian authorities report titanium dioxide is safe in food, in the face of EU ban

Canadian authorities report titanium dioxide is safe in food, in the face of EU ban

1 Sep 2022

Health Canada joins the UK’s Food Standards Agency in concluding that titanium dioxide is ‘safe to consume’, putting it squarely at odds with recent safety assessments in Europe that led to a ban of the ingredient.

Read more 
Most food businesses are placing inflationary costs on consumers, survey finds

Most food businesses are placing inflationary costs on consumers, survey finds

31 Aug 2022

Consumers are being hit with product price increases as manufacturers pass on higher costs to the public. But with some major food manufacturers registering profits, is a public backlash on the cards?

Read more 
Hyperlocalisation promotes food system resilience and diversification

Hyperlocalisation promotes food system resilience and diversification

30 Aug 2022

Climate change action and new technologies are driving a rise in hyperlocalisation throughout the global food chain, improving the industry’s adaptability and ability to meet consumer demands for greater choice.

Read more 
Tackling the rise of antimicrobial resistance

Tackling the rise of antimicrobial resistance

29 Aug 2022

As the 2030 goal of halving antimicrobial use edges closer and a 2022 regulation is brought in to reduce antibiotic use on farm animals, the food industry is loudening its calls for action amid the increasing resistance to antimicrobials.

Read more 
WWF report slams Europe’s damning effect on the global food system

WWF report slams Europe’s damning effect on the global food system

26 Aug 2022

Europe may not be helping, but in fact hindering the global food system by inciting gross environmental, societal, and fiscal harm, a recent WWF report shows. Consumers however are hungry for change.

Read more 
Researchers develop automation method to isolate volatile food ingredients

Researchers develop automation method to isolate volatile food ingredients

25 Aug 2022

A research team in Germany has applied automation to a long-standing method to isolate volatile food compounds, creating advantages over the existing manual process, which include food manufacturers’ potential to increase yields and lower the contamina...

Read more 
New partnership strives to improve cocoa farming in Ivory Coast

New partnership strives to improve cocoa farming in Ivory Coast

24 Aug 2022

Conseil du Cafe-Cacao and IDH’s Sustainable Trade Initiative launch a new programme, Cocoaperation, to support cocoa farming and improve the livelihoods of cocoa producers.

Read more 
This practical toolkit helps brands to improve food safety

This practical toolkit helps brands to improve food safety

23 Aug 2022

Food safety is one of the biggest challenges facing the global food industry. To combat this issue, companies need to establish strong food safety cultures. This practical guide is designed to help brands progress on their journey to food safety.

Read more