Global conflict, pandemic impacts, cause jump in food costs

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planting wheat
(Farm and Dairy file photo)

Russia’s attack on Ukraine has affected global markets for energy, fertilizer, food and more this year. But even before it began, the U.S. food system was dealing with increased costs and supply chain challenges from the pandemic and other factors.

“This war is a bigger shock, in my opinion, globally,” said Ian Sheldon, Andersons Chair of Agricultural Marketing, Trade and Policy at Ohio State University. “It’s just intensifying what was already happening.”

All of those factors are driving up food prices, and leading to challenges with the food supply in some cases. While the U.S. seems unlikely to see the same kinds of severe food shortages that some developing countries are facing, higher food prices are a major challenge, particularly for lower income citizens.

“People with lower incomes spend a larger share of their incomes on food and other necessities … they are going to be the ones that suffer the most from higher prices,” said Zoë Plakias, assistant professor in Ohio State’s Department of Agricultural, Environmental, and Development Economics.

Global impacts

Russia and Ukraine are both major suppliers of grains like wheat and corn, and sunflower oil to the global markets. The war is affecting not only exports, but also planting and harvesting in Ukraine, Sheldon said.

Droughts, export bans and other factors are all contributing to higher global prices for wheat and vegetable oil, in particular, Sheldon said. Higher costs and less supply could push about 43 million people into famine, largely in developing countries that import a lot of staples like wheat, corn and vegetable oil.

“They’re the ones facing probably the most intense impact of the war,” Sheldon said.

Shortages

The U.S.’s food supply is still strong overall, said Ty Higgins, of the Ohio Farm Bureau Federation.

“Part of reason I say that, a lot of countries are looking at American farmers to help make up what’s being lost in Ukraine, as far as crop production is concerned,” Higgins said.

Higher prices for commodities like wheat, corn and soybeans could help drive farmers to grow more, if they continue.

“The markets will tell the farmer what they need to do,” Higgins said.

Policy changes could also encourage farmers to grow more. The federal government has invested more in domestic fertilizer production, to try to alleviate the higher global cost of fertilizer.

President Joe Biden recently discussed making insurance for double cropping available to more counties. If that happens, many counties in Ohio would be eligible, Higgins said. There has also been some talk about increasing technical assistance for precision agriculture, which could help farmers do more with less.

Plakias said because of supply chain challenges, people could continue to see temporarily empty shelves in some cases. There are also specific challenges for some specific foods.

The current formula shortage is largely due to safety violations at a processing plant owned by Abbott, a major supplier of baby formula. The plant had to shut down because of the violations, so while the ingredients are there, the lack of capacity for processing created a bottleneck, Plakias said. And avian influenza has helped drive up price forecasts for eggs by 20% in 2022, as millions of birds have been culled.

But temporarily empty shelves and lower supply of some foods don’t necessarily mean that there is an overall shortage of food available in the system, she added.

Prices

Higher food prices, however, are likely to continue.

“Almost everything a farmer uses for crop production is higher than a year ago,” Higgins said. Higher input costs mean higher food costs.

Sheldon noted there could also be more price increases in the near future, since some of the impacts of price increases for food processors have not yet reached consumer prices.

These higher prices will hit people living on lower incomes the hardest. People struggling to afford food often have to turn to food banks and food pantries, or programs like SNAP, WIC and other food assistance programs, Plakias said.

“I do suspect with inflation, those pathways will see higher demand from low income consumers who are unable to afford food items that they normally purchase,” Plakias said.

Ohio food banks are already seeing the strain. Between supply chain challenges, higher input costs and higher food costs, it has been harder to food banks to get food from both purchases and donations, said Lisa Hamler-Fugitt, executive director of the Ohio Association of Foodbanks.

“Ohio businesses, farmers, growers, consumers have always been generous,” she said. But when their costs are going up, too, it’s much harder for them to donate. During the most recent major food drive, May 13, most Ohio food banks were down by about 60% from what they would have typically received before the pandemic. And the cost for food banks to buy some foods has nearly doubled.

At the same time, more people are turning to food banks as their costs of living increase. In the last quarter, Hamler-Fugitt said, food banks on average had to provide four fewer meals per person than just a year ago, to stretch what they do have. She expects that trend to continåue this quarter.

“It really is kind of the perfect storm,” Hamler-Fugitt said.

Future

It’s hard to know what comes next. Even if the war ends immediately, it could have lasting impacts. It’s not clear yet how much damage has been done to Ukrainian infrastructure for processing and exports, Sheldon said. And impacts to planting in Ukraine this spring have longer range implications.

“What’s going on is proving how globally interdependent we’ve become in commodity markets,” Sheldon said.

Ohio food banks are seeking an immediate $50 million from American Rescue Plan funding to help them cover rising food costs and meet increasing demand. Hamler-Fugitt noted with schools letting out for the summer soon, and after an enhanced child tax credit ended at the end of 2021, many families are likely to struggle.

“States now have record surpluses,” Hamler-Fugitt said. “The funds do exist. The issue is, do we have the political will?”

In addition, other factors like drought in some countries and lingering supply chain issues are likely to continue affecting prices. Even before the war, U.S. farmers were looking at higher costs for herbicides, fertilizer and more.

“None of them are really predictable,” Plakias said. “There are a lot of challenging things on top of each other.”

By the time the war began, many U.S. farmers already had their inputs and planting plans for the 2022 season, Higgins said. Last year’s wheat crop was also already in the ground. But if prices stay high, farmers may look at planting more wheat this fall.

“Right now, we haven’t done much in the way of planning for what’s happening in Ukraine from a crop production standpoint,” Higgins said. “But there’s going to be opportunities in the summer and fall to plan ahead for the next year or year and a half, to make a difference.”

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