How Global Conflict, Drought Have Led to Rising Food Prices

Global food prices are surging at the fastest pace ever as the war in Ukraine has disrupted crop supplies, piling up more inflationary pain on consumers and worsening a global hunger crisis. The agricultural commodity market has been an area to watch lately, given worries over the growing global food crisis and rising prices.

Globally, conflict can be the main cause of hunger, accounting for 65 percent of those who are food insecure and hungry today. "Conflict tears families, communities, infrastructures, food systems, and entire regions apart," says Santiago 'Jimmy' Mellado, CEO of humanitarian aid organization Compassion International.

Russia and Belarus are two of the major producers of potash, a component of fertilizer, globally. Farmers everywhere are impacted. An enormous amount of the world's food is therefore detained or interrupted as a result of Russia's exports being prohibited by several nations and Ukraine's planting season being damaged by the war.

Harvester
Harvester machine cutting and threshing in wheat crop field on Aug 5, 2022. Global food prices have been surging. Alexey Furman/Getty Images

Besides, Russia and Ukraine are major exporters of grains and they together account for more than a quarter of the global trade in wheat, and a fifth in corn. Ukraine is also the biggest exporter of sunflower oil.

In addition to sanctions, the spike in energy prices has raised production and transportation costs of fertilizers, raising the possibility of a continued surge in food prices. Russia and its ally Belarus are also the world's major fertilizer exporters.

Many countries have resorted to food protectionism amid rising shortages. Export restrictions are further making food prices even more expensive. Some specific soft commodities went even higher.

Corn, wheat, and coffee are among the few agro-based commodities that staged a rally lately. Drought and lower crop condition ratings have boosted corn prices. Moreover, dry weather in key producing regions of Brazil led to hikes in coffee prices. This has hurt the development of coffee buds.

Dock workers
Dock workers handling wheat bags in Djibouti on Feb 21, 2003. Russia and Ukraine are major exporters of grains and they together account for more than a quarter of the global trade in wheat. Sean Gallup/Getty Images

Many private analysts are cutting yield and total production of corn and soybean estimates. The United States Department of Agriculture's crop conditions report revealed a decrease of 3 percent in corn ratings, marking a larger drop than anticipated, per trade site Agriculture.com.

In a nutshell, the world is striving to restock grain reserves hurt by trade disruptions in the Baltic Sea and unfavorable weather conditions, especially drought, in some of the key growing regions.

Drought is reported to shrink crops from the U.S. Farm Belt to China's Yangtze River basin, resulting in fears of global hunger and weighing on the outlook for inflation. The rally is not expected to lose momentum in September too.

Produced in association with Benzinga.

This story was provided to Newsweek by Zenger News.