Editorial | Ukraine war an opportunity for domestic agriculture

Discussions about the impact on Jamaica of Russia’s invasion of Ukraine tend to focus primarily on the rise in the price of oil and its knock-on effect on the island’s economy, including its impact as an indirect driver of food inflation. But the war is also having a direct effect on the cost of food, to which the island’s policymakers, especially Pearnel Charles Jr, the agriculture minister, should pay attention. Hopefully, the situation will concentrate minds, leading to serious efforts to improve the island’s food security.

In that regard, and in the event that he has not been appropriately apprised of these matters, we commend to Mr Charles Qu Dongyu’s March 11 briefing notes to G7 agriculture ministers as well as his opinion article of the same date, posted on the website of the UN’s Food and Agriculture Organization (FAO). In both documents, the FAO’s director general paints a worrying, and for some countries, bleak picture for food security and nutrition in the near to medium term. We, however, see it as a call to arms.

“Countries dependent on food imports from Russia and Ukraine should look for alternative suppliers to absorb the shock,” Mr Qu advised in his article. “They should also rely on existing food stocks and diversify their domestic production to ensure people’s access to healthy diets.”

Jamaica is not directly dependent on food imports, from either country. Nonetheless, the FAO boss’ suggestion of building and diversifying domestic production is relevant to the island and is in keeping with the position long promoted by this newspaper.

FULLER CONTEXT

Some critical bits of data give a fuller context to this discussion.

As Mr Qu reminded the G7 ministers, last year, Russian and Ukraine, combined, accounted for approximately 30 per cent of the global export of wheat. For nearly 50 countries they were the main source of the grain, supplying at least 30 per cent of their needs. Of these countries, Russia and Ukraine supplied over half of their wheat imports.

Before the war, the FAO had projected that between March and June of this year, Russia’s wheat exports would reach eight million tonnes and Ukraine’s, six million, or a combined seven per cent (13.6 million tonnes) of projected global exports. With the imposition of sanctions on Russia by Western countries and the devastation and disruptions in Ukraine, there is deep uncertainty of how much, if any, of this grain will now reach global markets.

It is not only wheat that is likely to face market disruptions. Both countries are large exporters of maize (corn). Indeed, Ukraine, in the current period, was expected to ship 14 million tonnes of the commodity, or around 18 per cent of global supplies, making it the world’s third-largest exporter of the crop. Russia expected to export 2.5 million tonnes. The two countries are also significant producers and exporters of barley and dominate global production of sunflower seed and its oil, accounting for over half of the world’s exports. They also produce rapeseed. The loss of this output, or a portion of it, will put price pressures on other seed oils.

Mr Qu also told the G7 ministers that Russia is a major exporter of fertilisers, ranking in 2020 as “the top exporter of nitrogen fertilisers, the second-leading supplier of potassium, and the third-largest exporter of phosphorus fertiliser. The loss or reduction of these exports would not only impact global prices for the product, but agricultural production”.

Even before the war, supply-chain disruptions caused by the COVID-19 pandemic, and compounded by a sharp recovery in Western economies from their pandemic-induced recession, had caused sharp upward movements in the prices of food and other commodities.

PRICE INCREASES

Now, FAO simulations show that in a moderate scenario, a reduction of grain exports from Russia and Ukraine would likely cause an increase in wheat price by 8.7 per cent; maize by 8.2 per cent; other coarse grains by 9.2 per cent; and other oil seeds by 10.5 per cent. Over the medium term, also in a moderate scenario, these would increase by 10 per cent (wheat); 8.5 per cent (maize); 9.1 per cent (other coarse grains); and 8.5 per cent (oilseeds).

In a severe scenario, the price of wheat in the short term would spiral by 21.5 per cent but projected at 19.4 per cent in the medium term; maize would jump by 19.5 per cent in the near term but fall back to 13.9 per cent in the medium term. Other coarse grains would peak at 20 per cent near term but slip to 15.4 per cent in the medium term.

The bottom line is that international food and feed prices could rise between eight and 22 per cent – on top of the sharp rises, averaging over 20 per cent, during the past year.

Jamaica may not be able to do much about this. There are many commodities it must import – if it has the foreign exchange with which to purchase them. Obviously, the country will get less for the approximately US$1 billion a year it spends annually on food imports.

However, the island’s agriculture experts have long argued that more than a fifth of these imports could be substituted with domestic production, which, on the face of it, would release over US$200 million annually (over J$31 billion) for spending in the domestic economy. While these things have been talked about, the discussion has been accompanied by aggressive or coordinated policy action for it to happen – like, for instance, the declaration of specific programmes, with clear deliverables and timelines for implementation. Neither has there been convergence between what takes place on the farms with the analyses and research of institutions, such as the College of Agriculture, Science and Education and The University of the West Indies.

Instead, the island’s “most fertile A-1 soil”, as Bernard Lodge on the St Catherine plain was characterised by the National Environment and Planning Agency, is being further encroached upon, to be planted with more concrete for new townships. However, the current situation is both a challenge and an opportunity for Minister Charles.