Avoidable Hunger Games
Ukraine, now, has captured the imagination of geopolitical soothsayers who are indicating what could be the aftermath. Russia is one of the world’s main sources of grain, fertilisers and energy, all three related to the food industry. Ukraine is known as the breadbasket of Europe as it is the fifth topmost producer of wheat in the world. In addition, it is also a producer of corn, barley and sunflower. The armed conflict between the two countries is surely presenting a challenge in smooth food supplies. It has already started showing its impact as global commodity markets were thrown into turmoil and the food prices have started growing.
The United Nations fears that the war will further affect world food security, which has already been hit severely by the pandemic. Even before COVID-19, hunger was rising and it grew further during the pandemic. It has been estimated that 161 million more people are suffering from hunger than before the pandemic, taking the figure to 821 million. The war is going to add to this number. Although, there has been no major disruption in supplies as yet, the wheat prices have already grown.
Russia contributes 20 per cent and Ukraine contributes 10 per cent (together 30 per cent) of the world’s total export of wheat, which is at risk now. Bangladesh imports almost half of its wheat from the two warring countries. But wheat is not the only commodity whose price is rising. With rise in crude oil and fertiliser prices almost all other food grains are going to be costlier. Disruption in supplies will make them dearer.
As far as wheat is concerned, India may not face any major problem. In fact, the situation is likely to be beneficial with the possibility of increasing exports. Despite being the second largest wheat producer producing 13.53 per cent of world’s wheat, its export is only one per cent with major quantities going for domestic consumption. But this situation may change now as it can fill the gap in wheat availability in several countries caused by reduced exports from Russia and Ukraine. For domestic consumption its position is comfortable with its central pool of storage having 24.2 million tonnes of wheat, twice more than the buffer and strategic needs. Although growing exports may increase prices to a certain extent in local markets, it will be a positive move for Indian farmers. It is a welcome sign that the Indian government has already initiated a process asking its diplomatic missions to facilitate wheat export.
However, the same is not the case for edible oils for which the concern is more. India imported from Ukraine in 2021, $1.85 billion worth of vegetable oils, mainly sunflower oil. Out of a total 25 lakh tonnes sunflower oil import, Ukraine provides 17 lakh and Russia two lakh tonnes. Possibility of direct impact on the supply of 19 lakh tonnes out of 25 lakh tonnes of imports will result in sharp rise in edible oil prices.
The more worrying factor is the rise in prices of crude oil, which will grow the fuel prices, escalating prices of all commodities and ingredients required for food processing. Even the transportation cost of processed foods taking them to consumers will also grow, affecting the end prices of products. Any sharp price rise, that's just breaking free from the lockdown induced disruptions and financial decimation, will not go down well with the people.
Spending and sales will naturally go down, further pummeling the small players in the food processing industry. The sector will have to find ways to control prices despite the likely rise in the cost of ingredients. It will indeed, be a tightrope walk for the industry on cost and price front.
If that does not happen, then, in the words of American food anthropologist Sidney Mintz, “War is probably the single most powerful instrument of dietary change in human experience”, with people forced to alter their food habits for the worse.
The current valuation of the agriculture sector in India stands at $370 billion, and the value for the sector is definitely increasing by the year. According to the Economic Survey 2020-21, GDP contribution by the agriculture sector was 19.9 per cent in 2020-21, an increase from 17.8 per cent in 2019-20. Further, amid COVID-19, it was the farming community that showed exceptional resilience, which resulted in agriculture being the only sector to post a 3.4 per cent growth at constant prices in 2020-21, when the entire economy contracted by 7.2 per cent. As the thrust in the sector is constantly moving forward, it’s imperative that our farmers get more and more options in the market for their produce. And, there are indications that India is being aggressive in expanding the country's agriculture and processed food sector into the global market. Let us examine the role of new tech in mechanisation that can propel India’s agri growth.