How Bad Will Food Shortages Get?
In the spring of 2020, as lockdowns spread across the country, there were a couple weeks in which supermarkets emptied out, with meat and other fresh goods in particularly short supply. Even after the initial shock, the prevalence of COVID in industrial meatpacking plants along with other ongoing supply chain issues continued to cause intermittent shortages. Without a doubt it was the most disrupted and uncertain period I’ve experienced running a food business, and if you’d asked me three months ago, I would have been willing to bet good money that I wouldn’t see anything like it in the near future.
The Russian invasion of Ukraine has changed that, though in reality it’s mostly just exacerbated already brewing problems. There are three major areas that have the potential to cause real issues: a direct impact on the wheat supply, increased fertilizer and fuel costs, and general supply chain and logistical disruptions.
Wheat is still a staple crop
The first, obvious impact of the invasion, noticed far beyond people directly involved in agriculture, was a spike in wheat futures. Here’s a typical example, but there were dozens more across the mainstream press. Basically, because Ukraine supplies 11.5% of the world market for wheat, while Russia accounts for 16.8%, anything that limits the ability of Ukrainian and Russian farmers to plant and harvest crops could have significant downstream effects. Most at risk would be a particular subset of countries.
Between them, Russia and Ukraine supply the bulk of the imported wheat to several very impoverished countries, where even a modest increase in prices for a staple food could have real humanitarian and possibly political consequences.
Fertilizer and fuel prices
Even before the current war, fertilizer prices were at or near record highs. While it’s true that the war could theoretically further disrupt fertilizer markets, the increase in prices that is currently causing farmers pain is part of a larger trend that does not seem to be a direct consequence of the Russian invasion.
On the other hand, since synthetic nitrogen is created via a very energy intensive process, higher fuel prices certainly aren’t helping things, and anyone who’s been to a gas station lately knows that it’s expensive at the moment. In our food system, which is one of big machines and global trade, every step from planting to processing to the store shelf involve some amount of fuel, so beyond their impact on fertilizer higher energy prices will inevitably be passed on to consumers.
I’ve seen anecdotal reports of farmers choosing to plant fewer acres, but I haven’t seen the sort of data that would convince me it’s happening it any scale. It is clear that U.S. farmers have shifted some acreage from corn, which requires the heaviest fertilizer applications, to soybeans, which require somewhat less. On the whole, I’m guessing higher costs will translate to higher prices, not shortages. (I can envision a scenario in which grain farmers pay huge prices to establish crops now, only to have commodity prices crash, causing them to take significant losses, but that would actually probably help stabilize consumer prices, though it would do so at the expense of growers.)
Supply chain issues
This is the area I am the least confident making predictions about. Like increasing fertilizer prices, supply chain issues predate the ongoing war. But there are far larger dynamics at play, and I don’t know how to assess the impact any will have individually, let alone the collective consequences of them.
High fertilizer prices are one thing, but a lack of availability is another. Fertilizer is time-sensitive; you can’t make up for lost time applying it in August if the crop needed it in June. I’ve tried and failed to figure out how widespread a problem this is. The article linked above is a month old, and I haven’t found anything more recent to suggest the problem has worsened.
Meanwhile, a strain of bird flu primarily transmitted by migratory waterfowl is causing pain primarily to industrial poultry farms, both egg and meat. There is no treatment or preventative, so when it gets into a farm, which may contain hundreds of thousands or even millions of laying hens, all of those birds must be destroyed in an effort to limit the spread. This directly leads to egg shortages.
Those are just a couple examples, but the problem is vast and diffuse: the continued lockdown of critical freight hubs in China; ongoing computer chip shortages which are needed for tractors; internal and external embargoes on Russian and Ukrainian agricultural exports. If you can look at all that and feel comfortable guessing how it will all shake out tomorrow, let alone this fall or a year from now, then you are either much smarter or much more foolish than me.
But what if it isn’t an issue?
Remember a couple paragraphs up where I ascribed close to 40% of the global wheat market to Russia and Ukraine? It turns out that’s actually the export market. They are far less significant in terms of total production, and since wheat largely (though not entirely!) behaves as a fungible commodity, the market has robust mechanisms for sorting out price and allocation.
This is the thrust of the argument put forth by Aaron Smith, Professor of Agriculture and Resource Economics at UC Davis. Alarm about disruptions to the grain market is largely unwarranted, he argues, with the simple fact that we’ve dealt with similarly sized events plenty of times in the past couple decades being compelling evidence for his case.
My best guess
As sanguine as he is, Professor Smith acknowledges the potential risk to the food supply of countries that are particularly reliant on Russia and Ukraine for wheat, including those in the chart above. To my mind, if there are catastrophic food shortages in the coming year, this remains the most likely cause. I expect higher prices, and I wouldn’t be at all surprise by increasingly widespread shortages of particular items, like vegetable oil or chicken, to hit both developed and developing economies.
But the food system, from farmers to processors to middlemen to fertilizer and tractor producers is under incredible stress. I don’t know how to gauge it with any precision, but it certainly feels like an even more uncertain than the spring of 2020. The problems I’ve sketched are real and in some cases unprecedented, and they are occurring simultaneously. By temperament I’m strongly inclined to expect the continuation of the status quo rather than radical change or radical failure. When it comes to food shortages in particular and the viability of the agricultural system more broadly I’d still bet on something like normal, but I wouldn’t bet much.