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The Big Ag Short: Let's Not Hedge Our Bets Against Our Global Food System

The Big Ag Short: Let's Not Hedge Our Bets Against Our Global Food System

Published 08-05-22

Submitted by Bayer

corn harvester

On February 24, 2022, Vladimir Putin began his unlawful invasion of Ukraine – a war he had denied he would enter into just hours before. Today, five weeks later, he is continuing his atrocities despite large-scale diplomatic efforts and wide-ranging economic sanctions to convince him otherwise.

Along the way, Putin has taken thousands of civilian lives, repeatedly bombing humanitarian corridors. More than four million refugees have fled the country, marking the most significant refugee crisis in Europe since WWII; and hundreds of companies, including us at Bayer, have adjusted or halted their business operations in Russia to demonstrate an unambiguous stance against Putin's actions. Putin has not only set an immediate and devastating humanitarian crisis in motion; he is exploiting food as a weapon of war far beyond the borders of Ukraine. He is betting on a collapse of our global food system which will make Stalin’s Holodomor pale in comparison.

Even before the invasion, global food security was in a dire state. Wheat stockpiles were already running low due to drought worsened by climate change. Beyond climate-related harvest losses, stress factors included growing demand; the increased propensity of some countries to stockpile essential commodities more than what is required for their own needs; energy price inflation driving up the cost of production as well as reducing fertilizer availability; physical supply chain disruptions; conflict; and the ongoing pandemic. In 2020, the number of people in extreme poverty rose for the first time as a result of the pandemic. This means an additional 97 million people have been added to the 635 million subsisting on less than US$ 1.90 daily and who have no means to cope with food inflation which has already reached a historic high.

In the midst of the culmination of these factors, last November the World Food Programme warned that the world is facing "catastrophic hunger" for over 800 million people. And UN Secretary-General António Guterres said the world is facing a “hurricane of hunger and a meltdown of the global food system.” We now need to clarify both the intensity and path of this ‘storm’ to help more people.

War in the breadbasket of Europe has and will only place additional strain on this overstretched tightrope. The example of our global wheat supply illustrates this well: Ukraine and Russia together account for almost 40% of the world's total wheat production. Much of Ukraine's wheat is grown in the southeast, which includes areas that have suffered some of the heaviest shelling of the war so far. Ukrainian farmers are struggling to secure the harvest of this season's crops. The harvest does not consistently make its way into the global marketplace as economic sanctions and counter-sanctions ripple through the region. Usually, at this time of year, Ukrainian farmers fire up their tractors to start spring fieldwork – this year, many are taking up arms or using their tractors to move abandoned Russian tanks and troop carriers. Judging through the lens of uncertainty that lies ahead, it is likely that Ukrainian growers will struggle to plant in the war zone they now live in. As a critical exporter of wheat, corn, cooking oils, and other essential commodities, Ukraine’s inability to plant will mean scarcer resources. Scarcer global resources will mean higher prices – and higher prices most often hit the most vulnerable the hardest.

This reality in Ukraine is amplified by the significant reduction of grains and fertilizer that will come out of Russia. Within the European Union, nearly a third of the fertilizer used typically comes from Russia, the world's primary supplier. In addition to that, Europe produces 9% of global fertilizers with Russian gas. In the second half of last year, we had already seen a significant reduction of fertilizer production due to energy rationing in China. A farmer's "breakeven ratio" is generally about 6 kilograms of grain – that has now risen to about 10 kilograms of grain – to pay for 1 kilogram of nitrogen fertilizer, and using less fertilizer will only add more pressure to the global food system. The failed fertilizer ban in Sri Lanka demonstrates the fatal consequences that this type of experiment – whether regulated or involuntary – can be expected to have on food supply and livelihoods. For every 1% underutilization of fertilizer demand, an estimated 25-32 million people run out of food.

Moreover, the current La Niña weather phenomenon's added pressure may have a further depressing effect on the 2022 global harvest. Droughts in Northern Africa and the Middle East are already pointing toward poor regional harvests. In response to this situation, the UN WFP calculated before the invasion that 283 million humans are currently facing acute hunger, with 45 million in 43 countries, often in war zones, on the verge of starvation. We estimate that increased stress on food systems could lead to more than 500 million people facing acute hunger in the coming months.

Beyond these nutritional question marks, our climate and political stability are further concerns. The impacts on the existing global climate emergency are uncertain: will environmental disasters be added to the unfolding humanitarian and economic nightmares? Many countries are already signaling considerations to delay their clean energy transition to decrease their dependence on Russian oil and gas.

The European Union has now decided on various measures to help farmers increase their productivity in response to the food crisis. This is a step in the right direction. It is a relief for us to see a renewed focus on productivity. But it must not reduce our efforts for climate protection and biodiversity. On the contrary, now is the time to ensure productivity whilst doubling down on climate protection, and biodiversity. This will not be achievable without innovations such as genome editing, digitalization, and bio-fertilizers that enable us to make the quantum leaps in agriculture last seen as a result of the Green Revolution. Last year, at the UN Global Food Summit, the Biden administration introduced the "Coalition on Sustainable Productivity Growth for Food Security and Resource Conservation.” This was a significant step towards addressing Europeans' concerns about planetary boundaries. By joining this coalition, the EU has made an essential step towards transatlantic collaboration on food systems.

Political tensions and instabilities – especially in highly food import-dependent countries, including Egypt, Lebanon, and Nigeria – may also lead to a renewed increase in refugee flows from Africa and the Middle East to Europe. Hunger lights the match of instability in already fragile nation states, and the world could experience multiple points of conflict simultaneously. Therefore, we need to immediately focus on the knock-on effects of the Russian invasion of Ukraine.

Immediate calls to action to control damage and avert a full-scale food crisis

Food should not be used as a political tool in any case. Sadly, the only path to prevent that in the mid- and long-term is to sustainably produce sufficient food to attain the dual goal of protecting food supply and remaining committed to reaching SDG 2 "Zero Hunger" by 2030. Reinvigorating debates that juxtaposition sustainable food with sufficient supply is unhelpful – the moment for a drastic paradigm shift in our agricultural pivot is long overdue.

  1. Our responsibility as Bayer
    As a global supplier of corn, soybean, and wheat seeds, Bayer holds a considerable responsibility beyond our economic sphere of influence; a responsibility to customers, employees, shareholders, and the whole of society. To secure food in a world with a population growing towards 10 billion people affected by conflict, climate change, COVID-19, and rising costs, we stand up to our responsibility to help produce greater yields with fewer inputs. We heavily invest in new agricultural solutions and are committed to providing farmers with tailored solutions integrating critical tools to plant, grow and protect their harvests.
  2. Policy demands
    Increase alert levels – we call on the United Nations to demand full global attention to the risk of a broad collapse of our food systems.

Reach global consensus on severity of situation – we implore the global stakeholder ecosystem to develop a consensus on the extent of vulnerability of the global food system. We acknowledge that the best way to achieve this is by operating from a consolidated understanding of the relevant data that draws on the G20 Agricultural Market Information System (AMIS), Gro-Intelligence data, and UN institutional, development bank and industrial insights. This includes the real extent of excess grain storage around the world.

Lift food to the top of the global policy agenda – while it has been a relief to see the topic being included in the conversations at G7 and elsewhere, our food system needs to rise to the top of our global policy agenda, whether that is G7, G20 or COP27, even above global energy markets.

Support harvesting in conflict zones – we call on all stakeholders to ensure and support harvests in the conflict zone and avoid the unintended consequences of sanctions on regimes to ensure world market access to the significant outputs of agricultural inputs (fertilizers, potash), grains and vegetable oils of Russia, Belorussia, and Ukraine in line with the March 5 AMIS recommendation.
Demand that countries release stocks – governments that are panic-buying or hoarding food supplies in times of conflict are selfishly risking catastrophic ripple effects. We unambiguously call on countries currently holding the largest grain stocks to release the stocks on the market and to support UN WFP's hunger relief efforts.

Ensure financial liquidity – we are calling on the IMF, World Bank, and key donor countries to agree on increasing the economic capacity of burdened food-producing and food-importing countries, including programs that directly reach people suffering food insecurity. The global food system meltdown should become a priority of the institutions' Spring Meeting.

Create a global plan to avert meltdown – the stakeholder ecosystem needs to leverage the outcomes of the UN Global Food Summit and rally the key actors in global food markets to develop a global 2022-25 plan to reduce the prospect of rising food insecurity. Supporting the establishment of a food stability board could help document lessons from historic crises, help ensure market transparency, respond to market disruptions, and develop trade policies that benefit all consumers. It will not only stabilize prices, but also monitor and coordinate on risks in the food systems.

Collaboration is key – we need to convene key global players to consult on quick and large-scale industry-supported action. Ideally, this would merge the expertise of a broad range of public and private players including UN FAO, UN WFP, UN WMO, OECD and the CEOs of ChemChina, COFCO, Bayer, Bunge, CBH Group, Cargill, Dreyfus, YARA, among others.

Support smallholder and subsistence farmers – these individuals are essential to ensuring the food supply, oftentimes particularly to those communities that are most vulnerable to external shocks. This always holds true, but especially in times of crisis. The private and public sectors must work together to ensure that smallholder and subsistence farmers receive full support to enable them to increase their output.

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