The Russia-Ukraine war has long since been relegated to the margins of the news, but its consequences are large and wide-ranging and flow far beyond the obvious sphere of damage to the lives of millions of people in the fields of combat. The investment house Yelin Lapidot extensively reviewed the economic consequences of the war last year, and is now issuing a new review that updates the current situation – mainly in the areas of agriculture and the food market, and also – who benefits from the new situation. I gave you the main points. And for those who want to learn more – the full review will be attached at the end.
Hadar Wiener-Shurtz, VP of research Bilin-Lapidos. (Photo: Molly Naim)
1. Let’s start at the beginning: how central were Russia and Ukraine to the global food market? Well, very much. The two countries together were responsible for exporting about a third of the world trade in wheat, 17% of the world trade in corn and about 75% of the world trade in sunflower oil. The difference between the two is that while food exports accounted for only 4% of Russian GDP – for Ukraine it was much more significant.
2. The damage caused – some immediate and now and some long term. Along with Russia’s measures designed to prevent the export of goods from Ukraine – thus preventing it from significant income and the use of a huge amount of crops stuck inside the country, long-term damage was done to local agriculture, starting with the deliberate destruction of farms (this is about the massive killing of poultry houses, for example – another significant industry for the export of Ukraine), warehouses, agricultural equipment and grains – and ended with the burning of fields and the sowing of mines in about 13% of the country’s agricultural areas, which will make it difficult for it to return to cultivating fields even at the end of the war.
3. Many countries went into a spin following this crisis. In the Western countries this was manifested in rising prices and an effect on the pressure in the markets, and in Africa and Asia in a real shortage of goods. And as happens in every such crisis – at the end of the chain are many populations whose nutritional security has been compromised due to price increases and their transition to cheaper food, which within their reach, significantly increases health damage, of which obesity is only one.
4. At the same time – there are countries that have received an extraordinary opportunity to increase exports from their direction. For example, Brazil reached a peak in corn exports this year – in an amount comparable to that of the USA, while Australia reached a peak in wheat production – after a good amount of precipitation caused the grains to grow while the population and local demand remained stable. The decrease in exports from Ukraine and Russia opened doors for them to capture market shares New ones.
5. And yet, it must be said – to a certain extent the world managed to help. Alternative export routes were opened with great effort to allow Ukraine to export some of its goods despite the situation, and this certainly improved the situation. At the end of a year or more – we can say that the damage to Ukrainian exports is certainly dramatic – but much less severe than the forecasts predicted, and the drop in exports is around 25%-28% and not 33%-45% as economists feared at the beginning.
The fighting between the countries continues, and at the same time the local, regional and global efforts to reduce the damages. It must be remembered that this is not the only threat to the global food trade map, while at the same time we are observing climate changes and natural disasters that also create crises and dramatic changes in the field. We here will continue to follow and report on what is happening, and in the meantime, it is worth reading the full review of Hadar Wiener-Shurtz on the website of the Yelin Lapidot investment house.