Governments Tighten Grip on Global Food Stocks, Sending Prices Higher

WASHINGTON — Ukraine has limited exports of sunflower oil, wheat, oats and cattle in an attempt to protect its war-torn economy. Russia has banned sales of fertilizer, sugar and grains to other nations.

Indonesia, which produces more than half the world’s palm oil, has halted outgoing shipments. Turkey has stopped exports of butter, beef, lamb, goats, maize and vegetable oils.

Russia’s invasion of Ukraine has unleashed a new wave of protectionism as governments, desperate to secure food and other commodities for their citizens amid shortages and rising prices, erect new barriers to stop exports at their borders.

The measures are often well intended. But like the panic-buying that stripped grocery store shelves at various moments of the pandemic, the current wave of protectionism will only compound the problems that governments are trying to mitigate, trade experts warn.

Export restrictions are making grains, oils, meat and fertilizer — already at record prices — more expensive and even harder to come by. That is placing an even greater burden on the world’s poor, who are paying an ever-larger share of their income for food, increasing the risk of social unrest in poorer countries struggling with food insecurity.

Since the beginning of the year, countries have imposed a total of 47 export curbs on food and fertilizers — with 43 of those put in place since the invasion of Ukraine in late February, according to tracking by Simon Evenett, a professor of international trade and economic development at the University of St. Gallen.

“Before the invasion, there’s a very small number of attempts to try and restrict exports of food and fertilizers,” Mr. Evenett said. “After the invasion you see a huge uptick.”

The cascade of new trade barriers comes as the war in Ukraine, and the sanctions imposed by the West on Russia, are further straining supply chains that were already in disarray from the pandemic. Russia is the world’s largest exporter of wheat, pig iron, nickel and natural gas, and a major supplier of coal, crude oil and fertilizer. Ukraine is the world’s largest exporter of sunflower seed oil and a significant exporter of wheat, pig iron, maize and barley.

With countries facing severe threats to supplies of basic goods, many policymakers have quickly dropped the language of open markets and begun advocating a more protective approach. Recommendations range from creating secure supply chains for certain critical materials in friendly countries to blocking exports and “reshoring” foreign factories, bringing operations back to their home countries.

In a speech last week, Janet L. Yellen, the Treasury secretary, said the pandemic and the war had revealed that American supply chains, while efficient, were neither secure nor resilient. While cautioning against “a fully protectionist direction,” she said the United States should work to reorient its trade relationships toward a large group of “trusted partners,” even if it meant somewhat higher costs for businesses and consumers.

Ngozi Okonjo-Iweala, the director general of the World Trade Organization, said in a speech on Wednesday that the war had “justifiably” added to questions about economic interdependence. But she urged countries not to draw the wrong conclusions about the global trading system, saying it had helped drive global growth and provided countries with important goods even during the pandemic.

“While it is true that global supply chains can be prone to disruptions, trade is also a source of resilience,” she said.

The W.T.O. has argued against export bans since the early days of the pandemic, when countries including the United States began throwing up restrictions on exporting masks and medical goods and removed them only gradually.

Now, the Russian invasion of Ukraine has triggered a similar wave of bans focused on food. “It’s like déjà vu all over again,” Mr. Evenett said.

Protectionist measures have cascaded from country to country in a manner that is particularly evident when it comes to wheat. Russia and Ukraine export more than a quarter of the world’s wheat, feeding billions of people in the form of bread, pasta and packaged foods.

Mr. Evenett said the current wave of trade barriers on wheat had begun as the war’s protagonists, Russia and Belarus, clamped down on exports. The countries that lie along a major trading route for Ukrainian wheat, including Moldova, Serbia and Hungary, then began restricting their wheat exports. Finally, major importers with food security concerns, like Lebanon, Algeria and Egypt, put their own bans into effect.

Mr. Evenett said the dynamic was “still unfolding” and likely to get worse in the months to come. Ukraine’s summer growing season for wheat is being disrupted as fighting keeps farmers away from their fields and pulls workers off to war. And grocery stores in Spain, Greece and Britain are already introducing restrictions on the amount of cereals or oil people can buy.

“We’re already feeling the pinch in Europe of limited supplies of these key crops,” he said.

Several other consequential export bans on food are unrelated to the war, but they will still play into the global dynamic of rising prices.

A palm oil processing plant in Indonesia’s Riau Province. The country has halted outgoing shipments of palm oil, a key ingredient in packaged food.Credit…Kemal Jufri for The New York Times

China began ordering its firms to stop selling fertilizer to other countries last summer, in order to preserve supplies at home, Chad Bown, a senior fellow at the Peterson Institute for International Economics, and Yilin Wang, a research analyst at the institute, wrote in a recent blog post. Now that Russia has also cut off exports of fertilizer, China’s ban will be even more harmful.

“China’s decision to take fertilizer supplies off world markets to ensure its own food security only pushes the problem onto others,” they wrote, adding that “China’s ongoing export restrictions could hardly come at a worse time.”

Indonesia’s restrictions on palm oil, a key ingredient in packaged foods, detergent and cosmetics, are in line with similar bans the country placed on exporting the product before the war in an attempt to keep the price of oil affordable for Indonesian households.

Those measures will add to skyrocketing prices for vegetable oils, driven by a disruption in the supply from Ukraine, the world’s largest producer of sunflower oil.

Governments that put these restrictions in place often argue that their duty is to put the needs of their own citizens first, and the W.T.O.’s rules allow countries to impose temporary measures for national security or safety. But the measures can easily backfire, helping to push up global prices further.

Price increases for food have been felt particularly keenly in poorer countries in the Middle East and sub-Saharan Africa, which depend on imported food.

The Russia-Ukraine War and the Global Economy

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Rising concerns. Russia’s invasion on Ukraine has had a ripple effect across the globe, adding to the stock market’s woes. The conflict has already caused​​ dizzying spikes in energy prices and is causing Europe to raise its military spending.

The cost of energy. Oil prices already were the highest since 2014, and they have continued to rise since the invasion.  Russia is the third-largest producer of oil, so more price increases are inevitable.

Gas supplies. Europe gets nearly 40 percent of its natural gas from Russia, and it is likely to be walloped with higher heating bills. Natural gas reserves are running low, and European leaders worry that Moscow could cut flows in response to the region’s support of Ukraine.

Food prices. Russia is the world’s largest supplier of wheat; together, it and Ukraine account for nearly a quarter of total global exports. Countries like Egypt, which relies heavily on Russian wheat imports, are already looking for alternative suppliers.

Shortages of essential metals. The price of palladium, used in automotive exhaust systems and mobile phones, has been soaring amid fears that Russia, the world’s largest exporter of the metal, could be cut off from global markets. The price of nickel, another key Russian export, has also been rising.

Financial turmoil. Global banks are bracing for the effects of sanctions intended to restrict Russia’s access to foreign capital and limit its ability to process payments in dollars, euros and other currencies crucial for trade. Banks are also on alert for retaliatory cyberattacks by Russia.

In a blog post on Thursday, Abebe Aemro Selassie, the director of the International Monetary Fund’s African Department, and Peter Kovacs, an economist in the department, wrote that sub-Saharan Africa was facing a severe shock from rising food and fuel prices that would slow economic growth, sink governments into debt and erode standards of living.

Food accounts for about 40 percent of consumer spending in sub-Saharan Africa, they said, and around 85 percent of the region’s wheat supplies are imported.

International organizations have pledged to increase their support for emergency food supplies and other aid, but the scale of the problem is daunting.

Dr. Okonjo-Iweala said she was urging the trade group’s members to refrain from restricting exports and to share any buffer stocks of food, to try to keep prices from soaring. She said that fewer than 10 percent of W.T.O. members had imposed export restrictions and that she had made clear to members that such bans would only compound current problems.

“I’m very concerned about the pending food crisis and steps we need to take,” she told a group of journalists in Washington on Tuesday.

Dr. Okonjo-Iweala, who recently visited Brazil, a major agricultural exporter, said President Jair Bolsonaro had expressed concerns about Brazil’s ability to obtain fertilizer, which typically comes from the Black Sea region.

Bags of fertilizer at the port in Mykolaiv, Ukraine. Since the beginning of the year, countries have imposed a total of 47 export curbs on food and fertilizers.Credit…Brendan Hoffman for The New York Times

She said she had pressed Mr. Bolsonaro about whether Brazil had additional vegetable oil or grains that it could offer on global markets. Mr. Bolsonaro told her that the country’s crops were already under contract, but said Brazil would try to produce more next season, she said.

A prolonged war, or the addition of new sanctions, could cause prices to rise further. But even absent those trends, the factors that have pushed up prices may be hard to unwind.

In a report on Tuesday, the World Bank said the war in Ukraine had altered trade patterns in ways that would keep commodity prices higher through the end of 2024.

Countries have begun seeking out other sources of certain goods — for example, purchasing more costly coal from farther-flung nations like Colombia and the United States — to avoid buying from Russia.

And many of the price increases are interrelated. Higher energy costs are increasing the price of fertilizer, which is produced with natural gas. That in turn is pushing up agricultural prices as crops become more expensive to plant. Rising prices for wheat are also pushing up the price of rice, as people seek out alternatives.

The World Bank estimated that prices of non-energy goods, like agricultural products and metals, would increase almost 20 percent this year before moderating in following years, while wheat prices are expected to rise more than 40 percent to reach a high this year.

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