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Avoiding the storm: Changing how we eat is the only way to tackle food instability.

Avoiding the storm: Changing how we eat is the only way to tackle food instability.

As war continues in Ukraine, constraining global food supply, a stark warning has been given by the United Nations – a “hurricane of hunger” is coming.

Before the beginning of this year the world was already facing great challenges in feeding a growing population. Nearly 10% of the global population were faced with severe food insecurity, rising to more than 20% of those in the least developed countries. Meanwhile, food systems were driving rapid destruction of natural habitats, with 90% of deforestation attributable to agricultural expansion. With the global population expected to increase to 10bn by 2050, 2bn more than today, these pressures risk worsening.

What was already an uphill battle became even more challenging when Russia invaded Ukraine. Strained supply threw the global food market into flux. Wheat and corn prices spiralled upwards while energy prices also spiked, resulting in rises in the cost of producing food.

The warning from the UN is clear and unambiguous – this food crisis could last years, and tens of millions of people could be tipped over the edge into food insecurity, hunger and even famine.

But is there a way out of this man-made problem?

 

The basket is empty

Known as the ‘world’s bread basket,’ Ukraine exported 4.5m tonnes of agricultural produce every month before the invasion. This totalled 12% of the planet’s wheat exports, 15% of its corn and half of its sunflower oil. Combined with Russia, the two warring countries produce almost one third of the world’s exported wheat.

The knock-on effect of the war quickly became apparent. As the conflict stretched into a fourth month, it was estimated that the world had just 10 weeks’ worth of wheat supplies. With the shortages came swift rises in prices – at one stage corn was up 28%, while wheat increased 41% before falling back. With ports such as Odesa and Chornomorsk cut off during the conflict, Ukrainian exports of wheat and corn had to be moved by land, severely constraining supply.

And then came the energy price rises. Before the war, some 40% of the gas needed to fuel European homes came from Russia, as well as 46% of coal, which is used to generate electricity and power industry. Once the conflict began, fuel prices surged, bringing the war into the living rooms of families across Europe.

The warning from the UN is clear – tens of millions of people could be tipped over the edge into food insecurity, hunger and even famine

Read also: Ukraine crisis leaves Europe at an energy crossroads

The rise in energy costs has resulted in countries looking for alternatives, and some have opted for biofuels made from grains. This switch has resulted in less land being available for the production of food, in turn limiting areas outside of Ukraine which could be used to make up for the grain shortfall. In addition, fertiliser prices1 have spiralled following the spike in the price of natural gas, an essential feedstock in the production of nitrogen-based fertilisers.

This has had a knock-on effect for corn production in the United States, which uses a substantial amount of fertiliser, with suggestions that some farmers may shift production to other crops. The US Department of Agriculture2 has said farmers intend to reduce their corn planting by 4% this spring. In Brazil, the high prices are also said to be threatening the corn crop.

Together, all of these factors spell disaster for global food supply, with the poorest and most marginalised expected to bear the brunt. People living in areas where there are fragile agri-food systems are especially susceptible, according to the Food and Agriculture Organisation and the World Food Programme, both of which have called for action in order to stop famine in 20 ‘hunger hotspots’.

The UN has said that the war is worsening famine in the global south, as blocked ports in Ukraine and Russia mean that staple foods are not getting through. The planting season, which began in April for crops like wheat, corn, and sunflower, was frustrated by problems with fuel and fertiliser. This raises the possibility of further future supply problems.

By 2050 it is expected that an additional 2 billion people will inhabit the earth, building pressure on an environment already at breaking point

While there is much talk in the west of the cost-of-living crisis, the potential scale of the food shortage does not appear to have entered public consciousness. Last month, UN Secretary General António Guterres warned of the “spectre of a global food shortage” which could last for years.

A clear illustration of the scale of the problem can be seen through the price of wheat. One year ago it traded at about USD 6.78 a bushel, a price which now stands at USD 8.86. “Let’s be clear,” Guterres has said, “there is no effective solution to the food crisis without reintegrating Ukraine’s food production.”

Searching for solutions

The war has put new attention on an ever-present problem. Long before Ukraine’s borders were invaded, the problem of feeding a growing population already weighed heavily.

So what of the future? By 2050 it is expected that an additional 2 billion people will inhabit the earth, building pressure on an environment already at breaking point. The best projections are that crop production will need to increase by 60%. The worst case projection is that they will have to double.

So how do you fix this breaking system? By developing sustainable food systems and moving from a carbon-intensive economy to a clean economy.

Change needs to happen in four key ways – shifting diets away from meat to sustainable, plant-based food; minimising waste; increasing farming productivity and reducing emissions. Growing more food without damaging the planet is a significant challenge, but it can be done. And only by working on these four fronts simultaneously can we feed 10bn people by 2050.

Read also: The role of investors in the transition towards sustainable food systems

Technology has made a steady impact on modern agriculture, with precision farming enabling finer analysis of how best to work a piece of land. GPS sensors on tractors allow farmers to respond to different soil types, using only the amounts of water and fertiliser needed. Cows can now be given smart ‘tags’ that send data about their movements, feed intake and health, ensuring that if problems arise they can be dealt with promptly. Robots have been developed which can pick even the most delicate fruits and vegetables, after computers have identified the exact moment that plants need to be harvested. Where once these technologies were limited to large farms, or those with the means to afford them, these advances are increasingly being made available to smaller landholders, especially in Africa where there is more than a quarter of the world’s arable land3. There, farmers can be reminded via text message of the best times to weed and plant, a facility that has led to increased sugar cane yields.

Far too much of our food ends up in landfill. The UN Environment Programme’s Food Waste Index shows that over 900 million tonnes of food is thrown away every year – this amounts to 17% of the food available to consumers. To reduce this, on a household level, consumers are advised to freeze food and to buy individual items instead of packaged ones. But much broader schemes are afoot to deal with the problem. Social enterprises in the UK allow customers to buy left-over food from restaurants and coffee shops for knock-down prices via an app, while non-profits collect unused food from wholesalers and deliver it to charities and schools4. In Europe, an EU-funded project5 processes the waste from crop production and turns it into food packaging and agricultural chemicals, amongst other uses. Data companies in the US have also been acting to stop food waste at source, and to optimise supply chains in order to make food production as stream-lined as possible. Food that is bound for waste is redirected to food banks, and perishable food is repurposed for green energy6.

Artificial intelligence is edging into every part of our lives, and food production is no different. Much of the food waste generated results from poor ordering – in essence, over or under-estimating the amount that the customer needs. This can be partly rectified by AI models, as seen in the UK where supermarket chain Morrisons has used Blue Yonder to efficiently replenish shelves, improving on-shelf availability by 30% while at the same time reducing stockholding at stores. In London one company has achieved a 70% reduction in water usage by growing ‘micro greens’ under ground, using sensors to optimise growing conditions. While IKEA has used a system powered by AI to ascertain how much waste is leaving its kitchens. A camera and scales ‘learn’ to recognise the amount of food being discarded and calculate the cost to the kitchens, in turn reducing waste.

How do you fix this breaking system? By developing sustainable food systems and moving from a carbon-intensive economy to a clean economy

Read also: How much CO₂ is in your lunch?

 

The benefit for investors

Changing eating habits, improving food production and reducing food waste are the three pillars of the food system reinvention we need to prepare for a future with an enlarged population. This way we can reduce the dependencies that may arise when events such as the Ukraine war occur – events that shake the already fragile global economy and create volatility in the markets, affecting the poorest the most.

There will undoubtedly be seismic events, such as the Ukraine war, in our future, which will challenge the foundations of the economy. But in order for these foundations to stand firm we must change our relationship with food production, so that we are less reliant on single economies.

 

1 https://www.spglobal.com/commodityinsights/en/market-insights/blogs/agriculture/011922-fertilizer-costs-natural-gas-prices
2 https://www.ft.com/content/0ed87001-1cc0-485e-9eeb-bfdf5182a917
https://www.ft.com/content/3316885c-b07d-11e8-87e0-d84e0d934341
4 The Felix Project
5 https://agrimax.iris-eng.com/
6 https://www.divertinc.com/

Important information

This document is issued by Bank Lombard Odier & Co Ltd or an entity of the Group (hereinafter “Lombard Odier”). It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a document. This document was not prepared by the Financial Research Department of Lombard Odier.

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