Global food shock will last years, says report

Rising food prices and diminishing supplies as a result of the Russia-Ukraine war will likely last through 2024, said S&P Global Ratings in a report published today on RatingsDirect.


Fertilizer shortages, export controls, disrupted global trade, and escalating fuel and transport costs will all exert upward pressure on the cost of staples, said the report titled  "The Global Food Shock Will Last Years, Not Months".


"Our analysis shows low and low- to middle-income countries in Central Asia, the Middle East, Africa, and the Caucasus could be worst hit by the first-round impact," said S&P Global Ratings credit analyst Samuel Tilleray.


The report has examined which rated sovereigns are the largest cumulative importers, relative to their own GDP, of the key grain and seed-oil items most significantly affected by the conflict. The Caucasus nations Tajikistan, Uzbekistan, and Armenia look particularly exposed through their almost complete reliance on Russia for these key food commodities, should sanctions or self-sanctioning complicate trade. 


Similarly, the Arab states Morocco, Lebanon, Egypt, and Jordan each rely nontrivially on Ukraine for their food supply and are therefore susceptible to war-induced disruption to ports and processing activities, it said.


"We believe the shock to food supply will have negative implications for emerging market countries, affecting GDP growth, fiscal performance, and social stability," said Tilleray.


The potential impact on sovereign credit ratings will depend, among other things, upon the extent and severity of the food shock, the ability of governments to minimize the social and economic costs, and international efforts to help the affected countries, the report said.


"Although many of the sovereigns most exposed to this risk already have very low credit ratings, the negative economic or political fallout of the food shock could contribute to rating downgrades," said Tilleray.


Ukraine and Russia, both or individually, rank among the top three global exporters of wheat, maize, rapeseed, sunflower seeds, and sunflower oil. Together, they account for 12% of all food calories traded. Russia and Belarus were the first- and sixth-largest exporters of fertilizers globally in 2020, it said. - TradeArabia News Service




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