THREAT OF A GLOBAL FOOD CRISIS Refocusing our Food Policy

Illustration. (LEONARDO A. PUTONG)

Jakarta, IO – The threat of a global food crisis looms, following the Covid-19 pandemic, starting in 2020. Many reputable international organizations have predicted a crisis as food prices are swelling; further, Covid-19 has disrupted the logistics system, and the food value chain has been negatively affected. Nevertheless, some two years after the emergence of Covid-19, the global food system has proven quite resilient, with adequate production performance in most countries. The average price of rice in Indonesia has been quite stable, sustained at Rp 11,800/kg for two years, so that warnings about any food crisis by many international institutions are taken lightly. 

However, the disruption and impact of Covid-19 on the global food system has in fact been tremendous. Many food producers have been hit by drought, spiking prices of corn and soybeans. Once Russia invaded Ukraine, the rise in food prices has become more significant. As a major energy producer, the international response to the Russia-Ukraine conflict has resulted in soaring energy prices, particularly those for oil and gas. Bear in mind that petroleum is the single main pillar of the global logistics and trade system. Gas is the raw material for the production of Urea fertilizer, an important input for food production. Once the Russia-Ukraine conflict exploded in February 2022, fears of a global food crisis are growing due to the shock of the war in Ukraine, climate change and rising inflation. 

The World Bank released a pessimistic Global Economic Prospect report in June 2022, raising concerns about stagflation, defined as stagnation of economic growth coinciding with high inflation. We take a look and analyze the potential threat of a global food crisis, and the need to refocus Indonesian food policy and to implement relevant anticipatory strategies for the predicted food crisis.

A Global Food Economy 

Starting around the beginning of 2022, the global food economy has faced a fairly devastating environment, as food prices have shot up so wildly. The price of wheat has more than doubled, from an average of US$ 280/ton in 2021 to US$ 650/ ton as of May 2022 (Figure 1). Global vegetable oil prices have escalated wildly, even since Covid-19 in early 2020, nearly equaling the 2008 global food crisis. Crude palm oil (CPO) has jumped from an average of US$ 1,131/ton to US$ 1,717/ton in May 2022 (Figure 2). The price of rapeseed oil, widely produced in Europe, approaches US$1,900 per ton, a record high. Indonesia, as the largest producer of CPO, even suffered a spike in cooking oil prices, rising to above Rp. 20,000/liter, directly triggering socio-political concerns. 

Without having to mention them all, the prices of some food commodities, grains and vegetable oils have generally soared since the Russian invasion of Ukraine. Geopolitical issues in Eastern Europe are compounded by a disruption of the food value chain, as a result of the Covid-19 pandemic. The price of wheat (SRW) in June 2022 reached a record high of US$ 650 per ton, rising more than threefold when stacked against the average 2019 price. Fortunately, global rice prices, which were already steep following Covid-19, have started to stabilize. The rice production performance of Thailand and Vietnam is quite robust and has contributed to a stabilization of global rice prices. Domestically, rice production in 2021 started to recover, although the area harvested has decreased drastically, down by 245,000 hectares (2.35 percent), from 10.66 million hectares in 2020 to 10.41 million hectares in 2021. 

Global economic growth is estimated to plummet from 5.7 percent in 2021 to 2.9 percent in 2022, settling around an average of 3 percent in 2023-2024. In 2022, the economies of developed countries such as the United States (USA) will see mild growth: 2.5 percent for the Americans, Europe 2.5 percent and Japan 1.7 percent. The economies of developing countries and emerging markets generally grew more vigorously. China’s economy saw 4.3 percent, Indonesia 5.1 percent, Thailand 2.9 percent, Turkey 2.3 percent, Argentina 4.3 percent. However, high inflation affected many countries. In May 2022, the US inflation rate was 8.7 percent, Spain 8.7 percent, Germany 7.9 percent, Italy 6.9 percent, and Turkey 73.5 percent. The inflation rate announced for Indonesia is 3.55 percent, Switzerland 2.9 percent, France 5.2 percent, and South Korea stands at 5.4 percent. Apart from exchange rates, rising food prices in several countries have also contributed to a steep rate of global inflation. The threat of a global food crisis is increasingly evident in the midst of the Russia-Ukraine war. It is not impossible that such a food crisis would lead to a global famine. (FIGURE-1) 

Figure 1 shows how the impact of the Russian invasion to Ukraine exerted a significant effect on the price of wheat, a factor which might trigger a global food crisis in the near future. Fortunately, global rice prices remain relatively stable, even though global rice producers from Thailand, Vietnam, etc. are more concerned with domestic interests, a factor which might lead to a “new protectionism” in the rice trade. As mentioned previously, the harvested area of rice in Indonesia in 2021 has declined by 245 thousand hectares, which arouses serious challenges to rice production system in 2022. (FIGURE-2)