The global problem of food shortages amid the pandemic will require increased aid to the poorest countries, international experts warn. For Russia, this problem manifested itself in the transition to administrative regulation of prices, in the disappearance of the cheapest products from store shelves, as well as in the increase in prices for sugar, eggs, meat and sunflower oil by tens of percent. In the context of declining incomes of the population, this means that an average Russian family can now buy smaller physical amounts of food under its income. This is what is called reduced food availability.
The global food crisis during a pandemic takes on a variety of forms: in the United States, food benefits for the poor are increasing, shops are closing in Lebanon, in Africa, the number of hungry people is in the millions, in Russia the range of affordable food is shrinking, and in Ukraine, deputies are talking about the threat of hunger due to mass closure of small businesses.
The UN has long sounded the alarm over food shortages, but the pandemic has exacerbated the situation. On March 11, Antonio Guterres, UN Secretary General, announced about a creation of a working group to combat hunger. Last year, 67 countries already requested food aid, which is almost 10% more than in 2019.
Last summer, the head of the World Food Program, David Beasley, said the risk of hunger from a pandemic could reach “biblical proportions.” According to this organization, the number of people suffering from food shortages will rise from 140 to 270 million due to the pandemic. We are talking primarily about the countries of Africa, where half of the hungry live, as well as the Middle East, Asia, the Caribbean and Latin America. However, the problem also affected the developed countries. The New York Times reported that nearly one in eight households in the United States now lack food and, according to the European Federation of Food Banks, demand for food aid across Europe has grown by 30%.
World food prices have been rising for nine monthes, the Food and Agriculture Organization of the United Nations (FAO) reported. The price index is 2.4% higher than the previous month and 26.5% higher than in February 2020. At the same time, FAO announced that, according to preliminary forecasts, world wheat production in 2021 will reach a new record of 780 million tons, “since expectations of a recovery in production in the EU more than offset the production risks in Russia, which depend not only on weather conditions.”
To the climatic problems, usual for the Russian Federation this winter, administrative ones have been added, which affect the supply of Russian products abroad and which FAO is hinting at. In December 2020, food inflation in the Russian Federation in annual terms was 7.9% (7.7% in February 2021), and the government, at the insistence of President Vladimir Putin, introduced measures to restrict domestic prices for sugar and sunflower oil, as well as export agricultural products.
According to the Agroexport Center of the Ministry of Agriculture, in 2020 Russia set a record for food exports – 79.4 million tons of agricultural products worth $ 30.7 billion were exported to 150 countries. The previous record was recorded in 2018, when 78.5 million were exported. tons of products for 25.8 billion. The main article of food export is grain, which accounted for 33% of all supplies. Last year, 133 million tons of grain were grown in the Russian Federation, this is the second largest harvest in the history of the country. In an effort to sell as many products as possible before the introduction of duties on February 15, exporters have increased their supplies abroad: grain exports from Russia in January-February more than doubled, to $ 1.8 billion. The largest buyer of products from Russia in 2020 was China, it accounted for 13% of all supplies. Turkey is in second place with 10%, in third place is Kazakhstan with 7%.
On March 16, the head of the Ministry of Agriculture Dmitry Patrushev explained to the State Duma deputies that quotas and duties were introduced “so that the entire volume of grain would not be exported abroad.” The authorities’ measures to regulate prices should not lead to problems in the implementation of business projects, said the chairman of the Central Bank of the Russian Federation Elvira Nabiullina. Administrative bans on food price increases should only be a short-term measure, as they are fraught with inflationary pressures, she said Friday.
As previously explained by the president of the Russian Grain Union (RGU) Arkady Zlochevsky, with the current amount of duty, sowing wheat becomes unprofitable. According to RGS estimates, the rise in wheat prices on the international market is only 30–40% related to global trends, and the rest is the consequences of Russian restrictions, which “frighten consumers” and provoke excitement.
Forecasts of global food shortages associated with natural disasters and climate change are not so much of a technological as of an economic nature, – Denis Ternovsky, a leading researcher at RANEPA, explained to NG. “If we look at the dynamics of food production in the world, then over the past 20 years, when the population increased by 30%, the production of wheat increased by 33%, meat – by 40%, corn – almost doubled, and vegetable oils by almost two and a half. times. At the same time, any natural disasters primarily hit those countries where agriculture is at a low technological level and is not an industry, but a source of food for a significant part of the population, ”the expert says.
According to Ternovsky, agriculture in Russia is developing precisely according to the industrial type. “Over the past 20 years, the share of households in agricultural production has halved – from 54 to 27%. At the same time, the growth of agriculture itself was due to a combination of three factors: an increase in domestic consumption, import substitution, and an increase in exports. With a cumulative growth of 70%, the share of exports accounted for a third – 23 pp. Now the first two factors have almost exhausted themselves. Consumption has approached rational standards, we import mainly those products that are not profitable for us to produce, for example, tropical fruits. Some reserves in terms of both consumption growth and import substitution remain in dairy products, greenhouse vegetables and fruits produced in industrial gardens. Therefore, export remains practically the only driver of the industry’s development, and for the main products in which Russia specializes, it does not pose a threat to domestic consumption. We produce wheat and sunflower oil at least twice as much as we consume. And the rise in prices in the world markets is beneficial for producers,” – the expert explains.
However, the question has a second side of the coin – if domestic producers are integrated into the world market, then its high prices will inevitably be passed on to domestic consumers. “We have no problems with physical access of the population to food, questions arise with economic accessibility. In the context of stagnating incomes, the rise in food prices is most painful for groups of the population with low incomes. If, in general, food costs account for 34% of consumer spending, then for 40% of the poorest people this figure exceeds 45%, ”says Ternovsky.
The effectiveness of the wide arsenal of tools that the government uses to control prices – from export quotas and duties, to agreements with manufacturers and retailers on setting price limits – is not yet fully clear, the expert said. “The ability of export duties to lower domestic prices is undeniable, but in the long run, they also reduce production incentives. In addition, if we talk about wheat, since Russia is one of the largest players in the market, the size of duties is largely taken into account in world prices – from 50% in the short term to 25% in the medium term. And competitors can already take advantage of this and oust us from some market segments. Price cap agreements are also not a panacea. Practice shows that the longer the period of their validity, the stronger the incentives to violate them, and the main negative consequence can be a shortage of goods, which for the population and the economy as a whole is much worse than the rise in prices,” – Ternovsky said.
According to him, the current level of world prices is not a record and corresponds to the model of the commodity cycle in agricultural production – an increase in consumption causes an increase in prices, which in turn stimulates the expansion of production and a further decrease in prices. “World prices for sunflower oil are now at the level of 2011, and in 2008 they were 1.5 times higher. Under these conditions, the best way out is not to control prices as such, but to provide targeted assistance to those groups of the population who experience problems with buying food products due to low incomes,” – the expert is convinced.