Russia’s invasion of Ukraine means higher food prices in Canada and around the world

Hey there, time traveller!
This article was published 15/03/2022 (1015 days ago), so information in it may no longer be current.

Even before Russia invaded Ukraine and cut off one of the bread baskets of the world, Canada had a food problem brewing.

Like many countries left reeling by disrupted supply chains and high transportation costs, our grocery bills have been climbing — and the pinch is being felt by low-income families.

As the situation gets worse, it’s going to disproportionately hurt the poor, and the solutions are few and far between.

We learned Wednesday from Statistics Canada that Canada’s inflation rate in February was 5.7 per cent, the highest in 30 years. We’re all too familiar with the havoc oil and gas prices can play with our daily expenses — filling up your car with gas cost 32 per cent more in February compared to a year earlier, and the Russia-Ukraine conflict will continue to make those prices volatile.

Food weighs just as heavily, though, and the prospects for relief are even more dismal. Globally, food prices have climbed steeply throughout the pandemic, and are higher now than at any point since the early 1970s.

The Russian invasion of Ukraine, which not only throws Ukrainian farming into question but also has meant the closure of key shipping routes from the region, compounds the trouble — with devastating effects for food security in developing countries writ large, and among low-income populations around the world.

“The end game is, a lot of people are going to be hungrier,” says agri-food consultant Ted Bilyea, a former executive at Maple Leaf Foods Inc. “That will be how we get through this crisis: people will eat less.”

Ukraine and Russia are responsible for so much of the world’s supply of wheat, corn, animal feed and vegetable oil that taking them out of the global supply equation is having wide-ranging effects. Together, Russia and Ukraine supply more than a third of the world’s trade in wheat. They supply 73 per cent of global trade in sunflower oil, and more than a quarter of world trade in barley.

And since most countries don’t stockpile much excess food (China is an exception), losing access to Ukrainian and Russian production affects meat production, planting decisions and food security this year and next, around the world.

The most immediate effect of the conflict is rising prices, which — on the surface — help Canadian farmers, who are also among the world’s largest producers of grain and oilseeds.

The Canadian economy is “kind of protected,” Bilyea said in an interview, expanding on a presentation last week with other experts through the Canadian Agri-food Policy Institute.

Even as some economists have raised the spectre of stagflation — inflation at the same time as stagnant growth, an intractable problem — in other countries, Canada is still expected to grow this year thanks in part to the high commodity prices that are causing so much hardship elsewhere.

But it’s not quite that simple. Higher commodity prices are also driving up transportation costs, and fertilizer is going through the roof. Canada produces a lot of that too, but we still depend on Russia for some.

Basic economics would dictate that the answer to a supply shock is to increase supply. Rising prices, in theory, would compel Canadian farmers to plant more and do whatever they can to increase their output. And indeed, that would be a welcome move right about now — helpful not just to Canadian consumers and low-income households looking for lower prices, but also to the rest of the world as it tries to make do with uncertain supply from Ukraine and Russia.

But that’s not a reliable assumption by any means right now, says Bilyea. Canadian grain producers can’t simply turn on a dime to increase their production and feed the world.

For one, the weather has been extremely unkind to Canadian farmers lately and has become more unreliable as climate change takes its toll. For another, arable land in Canada is already maxed out, he says. Expanding would come with environmental implications.

We should at least look for better ways though. That’s what we’re doing with oil and gas — scrounging around Canada looking for every last barrel of oil or possibility of gas to make up for cutting off Russia.

With food, we need to ask ourselves the same question: what can we do to boost supply, immediately and sustainably?

Producers in the Prairies are already thinking hard along these lines. The Canada West Foundation points to analyses by the Alberta Federation of Agriculture, the Alberta Wheat and Barley Commission, and Cereals Canada, among others. And every agricultural producer in Canada is undoubtedly eyeing commodity markets closely.

“High prices of inputs for wheat, like fuel and fertilizer, have left farmers with a tough decision — do they expand their output or not,” the foundation says in its latest newsletter. “In short, this growing season will be one to watch to see how producers pivot their plans.”

One reason why we have so many Ukrainians in Canada, and why we feel so much affinity to Ukraine, is because we are both nations of wheat and grain farmers. They settled our West and brought their expertise.

Our public officials and farming sector regularly boast about Canada’s innovative approach to agriculture and our competitiveness on the world stage. Now is the time to show our strengths.

Heather Scoffield is the Star’s Ottawa bureau chief and an economics columnist. Follow her on Twitter: @hscoffield