Within about a week of Russian troops crossing into Ukraine in February 2022, prices for soybeans and some vegetable oils jumped roughly 50% to 60%. Joseph Glauber of the International Food Policy Research Institute gave ABC News that figure. The UN’s Food Price Index followed, reaching a record 159.7 points in March 2022.
Then the story turned. The shift is that the feared global food crisis largely did not happen, while energy turned out to be the harder problem.
Food: panic, a deal, and adaptation
Both countries sell large volumes of food and fertiliser abroad, so analysts expected the worst, especially for the Middle East, North Africa and the Horn of Africa. Finland’s FIIA think tank later judged the initial fears “somewhat overblown.” Food prices had peaked in March 2022 and fell afterward. Surplus crops from elsewhere filled the gap. Glauber said the global food supply “dodged a bullet” as the U.S., Canada and the European Union had decent harvests, Australia posted a record wheat crop, and Russia exported more wheat than anyone predicted.
One mechanism mattered more than the others. In July 2022 the UN and Turkey brokered the Black Sea Grain Initiative, which reopened three Ukrainian ports. Ships were inspected by Russian, Ukrainian, UN and Turkish officials, to confirm they carried only food. By the time Russia suspended the deal in July 2023, the Joint Coordination Center in Istanbul counted 32.9 million metric tons of food exported, with more than half going to developing countries. The World Food Program moved 725,000 metric tons of humanitarian aid out of Ukraine to places near famine, among them Ethiopia, Afghanistan and Yemen.
Moscow’s complaints were about sanctions on the Russian Agricultural Bank, shipping and insurance restrictions, and an ammonia pipeline that never started. Analysts at CSIS replied that Russian production and exports were up on pre-war levels. USDA estimates put its 2022-2023 wheat exports at a record 45.5 million metric tons.
When the deal was suspended, Chicago wheat rose about 3% to $6.81 a bushel, still roughly half the previous year’s peaks. Prices slipped later that day. Not a panic, then. Glauber also noted that only about 25% of the food price at the grocery store traces to the underlying commodity, so costs move through animal feed and other channels.
Energy: the real shock
Gas was another matter. In August 2022, DutchNews reported record-breaking gas prices of €600 per megawatt hour, against €34 two years earlier, blaming the war and reduced supply from Russia. Gazprom had just announced a maintenance shutdown of the Nord Stream 1 pipeline, which supplies more than 40% of the gas EU countries use. Coal added to the pain: low water on German rivers stopped barges reaching Antwerp and Rotterdam, and the price of a ton of coal rose fourfold in two weeks.
Countries scrambled. The Dutch cut value added tax on energy bills and set up compensation for low-income families. The Netherlands was on track to fill gas reserves to 80% of capacity by November 1, although wholesaler GasTerra stopped storing gas at its Norg facility because prices were too high.
Sources
- Why allowing Ukraine to ship grain during Russia's war matters to the world (AP)
- 1 year later: How the war in Ukraine is affecting food supplies, prices around the world (ABC News/GMA)
- Russian blackmail and the Black Sea Grain Initiative (FIIA)
- Gas prices keep setting new records, NL tops European league table (DutchNews)
