The impact of the Russia-Ukraine war on food security
More than 6 weeks into Russia’s invasion of Ukraine, there’s no end in sight to the conflict that has shook the world to its very core.
Aside from the immense suffering caused by Russia’s invasion of Ukraine, the war has had major repercussions around the world, especially on food security.
The head of the UN World Food Programme recently warned that the war was creating a food crisis “beyond anything we’ve seen since World War II” leading to surging food prices and possibly shortages in many countries that rely on exports from Russia or Ukraine.
The chart illustrates, based on data from the Food and Agriculture Organization of the United Nations (FAO) that the Ukraine and Russia are major producers of wheat, barley and maize, accounting for an average (combined) share of 27%, 23% and 15% of global exports between 2016 and 2020, respectively.
Even the World Food Programme itself gets 50% of its grain supplies from the Ukraine-Russia area and is now facing dramatic cost increases in its efforts to combat food emergencies around the world.
“This is a catastrophe on top of a catastrophe,” the WFP Director said, referring to the devastating effect the COVID-19 pandemic has had on world hunger.
According to the UN organization, the number of people facing acute food insecurity had jumped from 135 million to 276 million since 2019 – and that’s not even taking the conflict in Ukraine into account.
In total, more than 800 million face hunger around the world, while 44 million people in 38 countries are teetering on the edge of famine, according to WFP.
Global food prices surged to a record high in March according to the FAO Food Price Index.
The index consisting of the average of 5 commodity group price indices weighted by the average export shares of each of the groups jumped to 159.3 points in March, indicating a nearly 60% increase in food prices compared to the 2014-2016 base period.
The war in Ukraine is clearly the biggest driver behind the latest surge.
After all, the region is often referred to as the world’s breadbasket due to its major role in global grain supplies.
As a consequence, the FAO Cereal Price Index jumped 24 points to 170 in March, largely driven by export disruptions related to the conflict.
“The expected loss of exports from the Black Sea region exacerbated the already tight global availability of wheat,” the FAO finds, adding that maize and barley prices also climbed to record levels in March.
The Vegetable Oil Price Index climbed even higher than the Cereal Index to 248 points, as Russia and Ukraine account for more than 60% of global sunflower oil exports, with expected supply disruptions also driving up the prices of substitutes such as palm, soy and rapeseed oils.
Pandemic’s E-commerce Surge Proves Less Persistent, More Varied
There’s no doubt that e-commerce helped many navigate the pandemic, from online shopping to curbside pickup to food delivery. But as we slowly emerge from lockdowns and other restrictions, it’s less clear how this shift to digital commerce may evolve across economies and industries.
This raises questions about how much digital consumption increased, whether the crisis widened the digital divide or spurred economies with little e-commerce to catch up, how permanent the shift to online sales will be, and what factors explain deviations between economies and sectors.
The IMF investigated these questions in new research that uses a unique database of aggregated and anonymized transactions through the Mastercard network from across 47 countries from January 2018 to September 2021.
They found that the share of online spending rose more in economies where e-commerce already played a large role—and that the increase is reversing as the pandemic recedes.
This research, a new partnership between Mastercard, the International Monetary Fund and Harvard Business School, shows how private-sector data can help advance empirical economics and will be the first in a series of such studies.
Variation across economies
On average, the online share of total spending rose sharply from 10.3% in 2019 to 14.9% at the peak of the pandemic, but then fell to 12.2% in 2021.
Though the latest online share of spending is higher than before the pandemic started, it’s only 0.6% above the growth trend for e-commerce had the crisis not happened.
While most economies are now below those peak levels, there are still significant differences among countries.
The online share of spending is still above pre-pandemic trends in about half of economies, from large emerging economies such as Brazil and India to other middle-income countries like Bahrain and Jamaica.
In all the others, including the US and many advanced economies, the online shares are now either at or below the predicted pre-COVID trend levels.
Those trends are estimated in each economy using a simple extrapolation of e-commerce’s path before the pandemic and reflects what would have been predicted in the absence of the crisis.
They found that e-commerce increased more in economies with a higher pre-COVID share of online transactions in total consumption, exacerbating the digital divide across economies.
For example, Singapore, Canada and the UK had high shares to begin with, and their online penetration went up even more during the pandemic.
On the other hand, countries like Brazil and Thailand had low online shares pre-COVID, and they experienced less of an acceleration.
How persistent was the effect on online sales?
Strikingly, the latest data suggest that the spikes in online spending shares are gradually dissipating at the aggregate level.
The average online spending share at the peak of the crisis was 4.3% above the level that would have been predicted before it hit.
This difference drops to only 0.3% by the end of our sample period.
Pandemic restrictions, fiscal support
One explanation for the variation across economies, and in online share of spending, may be the difference across pandemic-related mobility restrictions. Not surprisingly, economies with stricter limits saw much higher online spending.
This was particularly true at the beginning of the crisis in Q2 of 2020, when lockdowns severely curbed movement in most economies. However, as the pandemic continued, that correlation between restrictions and online spending weakened – consistent with the declining impact of lockdowns and other restrictions on economic activity over time.
In addition, fiscal support during the pandemic helped boost e-commerce penetration, likely by increasing consumption, which, in the presence of pandemic restrictions, could mostly be done online. Wealthier, more digitally mature economies also returned faster to pre-pandemic pace of online spending once the crisis receded.
One common narrative is that the pandemic accelerated digitalization, forcing consumers to learn how to shop online, and that this learning was here to stay. While the research results support the quick uptake of e-commerce, the persistence of learning does not appear broad-based.
That said, they found significant variation by industry. The embrace of e-commerce appears to be particularly longer lasting in restaurants (more specifically in food delivery), health care (which includes telemedicine) and some categories of retail, including department stores, electronics, and clothing.
During the initial surge of the pandemic, there was a big demand for e-commerce relative to in-person commerce. Economies and sectors already familiar with some of the technologies were able to go online to a larger degree. While the pandemic forced consumers to learn quickly, our results suggest that early adopters further extended the use of e-commerce within their economies.
Further, there are two possible explanations for differences in the embrace of e-commerce across industries. First, this could reflect that mobility hasn’t fully recovered, along with the in-person nature of some sectors such as dining. Second, digitalization in these same sectors wasn’t particularly high before the pandemic, and those were the areas where COVID-19 propelled the shift the most.
The share of online spending rose and fell most dramatically in those economies and sectors where e-commerce was already thriving before the pandemic. Industries with lower levels of digital maturity—including retail, restaurants, and health care—have greater potential for e-commerce, particularly in less developed markets, making them potentially ripe for change.
This article first appeared here: (https://blogs.imf.org/2022/03/17/pandemics-e-commerce-surge-proves-less-persistent-more-varied/)
South Africa’s heaviest rains in more than six decades shuttered operations at its main port, with resultant flooding damaging key logistics arteries for the continent.
Operations at the Port of Durban, sub-Saharan Africa’s biggest container hub, were suspended Monday night after the eastern city received 307 mm of rainfall within 24 hours.
That kind of deluge is normally associated with intense hurricanes.
Durban’s port handles about 60% of South Africa’s shipments, and it also transports goods and commodities to and from nations in the region as far north as the Democratic Republic of Congo.
Maersk, one of the world’s biggest container lines, suspended some operations at the port due to damage caused by the flooding. Videos and images of containers bearing its name adrift in the water are now common.
As the port gradually re-opens — state-owned rail and port operator Transnet SOC began resuming operations Wednesday morning — authorities have prioritized evacuating cargo including food, medical supplies and petroleum products.
Shipping will only resume when it’s deemed safe for marine craft and vessel navigation.
The floods washed away bridges and damaged harbour access roads and major routes, causing queues of carriers stretching dozens of kilometers to form along the N3 highway.
The N3 road connects the port to the commercial hub of Johannesburg and is also the start of trucking routes to and from SA’s northern neighbours.
Rail routes in Durban and surrounding areas have also been affected.
More rain is forecast for the eastern KwaZulu-Natal province this weekend, with the risk of localised flooding and strong, damaging winds, according to the South African Weather Service.