Forex Analysis & Reviews: 26.05.2022 - Food crisis threatens Europe

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26.05.2022 03:18 PM

Food crisis threatens Europe

The largest food crisis in Europe, unseen since World War II, is looming. This was recently reported by the Chinese newspaper Xinhua, blaming not only the military situation in Ukraine but also the European government, which has imposed harsh sanctions against Russia.

Russia and Ukraine together account for nearly one-third of the world's wheat supply. Ukraine is also a major exporter of corn, barley, sunflower oil, and rapeseed oil. Russia and Belarus, which is also under sanctions, account for more than 40% of global crop nutrient potash exports.

The Chinese newspaper Xinhua writes that EU countries have already started to feel the food crisis. For example, due to the disruptions of wheat and corn exports from Russia and Ukraine, the prices of many food products have soared in European stores, and in some countries, there is a shortage of certain types of products.In addition, sales of fertilizers from Russia and Belarus stopped, which caused the prices of commodities to soar as well. Maximo Torero, chief economist of the UN Food and Agriculture Organization, has already admitted that if this problem is not solved, next year most European countries will have difficulties with food supply.In turn, the head of the European Commission, Ursula von der Leyen, said on Tuesday that Russia was to blame because it confiscates grain stocks and special equipment and blocks Ukrainian ships with wheat and sunflower seeds in the Black Sea. Speaking at the annual World Economic Forum in Davos, Switzerland, von der Leyen called on all countries of the world to unite and open alternative routes in order to get as much of the important food commodity - grain - out of Ukraine as possible. This idea was fully supported by the EU agriculture ministers at the meeting in Brussels.

The start of Russia's military operation in Ukraine and the subsequent attempt by Western European countries to economically hurt Moscow, isolating it from the global market, provoked an unprecedented jump in prices not only for grain and fertilizers but also for vegetable oil and energy.

Moscow argues the opposite, blaming Western countries for the artificial creation of a global food crisis, which is being implemented because of the harshest sanctions ever.

The European Commission assures the public that European food stocks are under control, but admits that with the deficit of Ukrainian exports of corn, wheat, vegetable oil, and rapeseed, food and animal feed prices in all EU countries will skyrocket, thus putting pressure on farmers as well.

Clearly, sentiment in Europe remains unstable and even depressed. Global economic growth is in great doubt, especially as a number of central banks are trying to fight rampant inflation by tightening monetary policy. European Central Bank head Christine Lagarde announced this week that the ECB's negative deposit rate would begin to rise in July. By the end of September, this rate is expected to be at zero or "slightly higher," and then it is expected to continue rising "toward neutral rate."

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