Horizons #80 – Sad lessons from history: the war in Ukraine

02 November, 2022

by Professor Ross Kingwell, AEGIC Chief Economist

Millions of global grain consumers and millions of Ukrainians are hugely affected by the war in Ukraine. But for Ukrainians their suffering is a repeat of history.

At their zenith before 2022, Russia and Ukraine supplied around 30% of the world’s wheat exports and were globally important suppliers of barley. Additionally, Ukraine was a major source of sunflower oil. Yet since Russia invaded Ukraine in February 2022, large swathes of Ukraine’s croplands have become battlefields and its grain export infrastructure has been extensively damaged. The Statistics Service of Ukraine estimates that around 40% of Ukraine’s cropland may not be planted this year and, due to the expense and difficulty of obtaining crop inputs, wheat production may be halved.

Mariupol. Ukraine. (YuriyMaltsev/Shutterstock.com)

What many people fail to appreciate is that this magnitude of foregone wheat production is equivalent to the volume usually consumed by 151 million people. Those people who would normally access the affordable wheat supplied by Ukraine now need to rely on more expensive wheat shipped from other origins. In addition, due to demand competition for the reduced global supply of wheat, the price of wheat has been pushed up.

The United Nations and World Food Programme has warned that food insecurity has worsened in the past year for 193 million people across more than 20 countries—of these, Afghanistan, Ethiopia, Nigeria, Somalia, South Sudan, and Yemen are listed as requiring urgent, on-going humanitarian interventions to avoid starvation and death. These low-income countries are especially affected as they must allocate more of their already low incomes to food purchases. Furthermore, where their governments subsidise food purchases to lessen malnutrition, then the inevitable result is fewer public funds for education, healthcare, and social services in these already poor countries.

The unfolding tragedy in Ukraine adds to its historical trauma regarding its interaction with Russia. Not widely known but remembered in Ukraine to this day is the Holodomor. The Holodomor is known in Ukraine as the ‘terror-famine’ or the Great Famine. It was a man-made famine from 1932 to 1933 during which 4 to 8 million people died from starvation. After farms in Ukraine were collectivised by the Soviet Union, grain production plummeted, the rural economy was disorganised and there were severe food shortages. Millions of Ukrainians starved to death.

So Ukrainian farmers intimately understand the importance of grain to their lives and livelihoods of not just themselves, but the people who rely on their crops. The current tragedy of the war in Ukraine is not only a re-visiting of history, but a wider tragedy for the millions of under-nourished people who depend on grain exports from Ukraine.

Banner image: Mariupol. Ukraine. (YuriyMaltsev/Shutterstock.com)

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Horizons: the AEGIC Economics and Market Insights blog

Expert grains industry analysis and commentary from AEGIC’s Economics and Market Insight Team on a range of big-picture topics that affect Australia’s export grains sector.

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