Recently, the UN General Assembly adopted a resolution calling on the international community to urgently support countries affected by the food security crisis through coordinated actions.
This article will discuss the impending food crisis and how it will impact the global stock markets.
As expected, the war in Ukraine is having a far-reaching impact, particularly on the global food supply. With Ukraine and Russia accounting for nearly a quarter of the global wheat export. The cessation of wheat supply as a result of Black Sea ports closure (for Ukraine) and western sanctions (for Russia) has wreaked havoc on the global wheat supply. This is particularly felt by the western African and the Middle East nations.
The war in Ukraine has exacerbated the global food system weakened by COVID-19, climate change, and an energy shock. Antonio Guterres, the UN secretary-general, warned on 18th May that the coming months threaten “the specter of a global food shortage” that could last for years. The soaring cost of staple foods has already raised the number of people facing food insecurity from 440 million to 1.6 billion. With the war in Ukraine turning into a protracted conflict, hundreds of millions of people could fall into poverty. Political unrest will spread across the globe.
The World Food Programme (WFP), before the Russian invasion of Ukraine, had warned that 2022 would be a terrible year. China, the world’s largest wheat producer has stated that this year’s crop may be at its worst ever after rains delayed planting last year. Additionally, extreme temperatures in India and a lack of rain in other breadbasket threaten to sap yields, from America’s wheat belt to the Beauce region of France. The Horn of Africa is being ravaged by its worst drought in four decades.
Conclusion:
Soaring food prices would be an additional burden in this environment of high, soaring commodity prices. Food shortages combined with the rising energy prices will factor in already high inflation. Rising inflation can be costly for consumers, stocks, and the economy. The stock markets tend to be volatile in an environment of high inflation. High inflation has historically correlated with lower returns on equities.
