Kerch Strait warning, a call for vigilance

In March 2022, the FAO’s benchmark food price index hit an all-time high, following Russia’s full-scale invasion of Ukraine. More than four years later, those fears of a global food crisis have revived with an escalation of two-way strikes on ports, grain terminals and cargo vessels across the Black Sea, Kerch Strait and Sea of Azov. From an agricultural trade perspective, the intensified tensions in this region arguably pose a greater threat today than the conflict in West Asia. The world has somewhat adjusted to the supply disruptions from the blockade of the Strait of Hormuz. This was also the case with Russia-Ukraine, where the initial cycle of major missile and drone exchanges had given way to a gradual resumption of grain shipments. That period of relative calm has been shattered by the effective halting of operations in the Greater Odesa port complex that handles about 90 per cent of Ukraine’s agricultural produce exports. More than 80 per cent of Russia’s grain exports move through ports on the Sea of Azov and the Black Sea, which have all again been targets of Ukrainian attacks. The resultant paralysis of export trade can spill over into a global food supply crisis similar to that in 2022. Russia and Ukraine together account for over a quarter of the world’s wheat exports, with these shares at roughly 15 per cent in corn and barley and 60 per cent-plus for sunflower oil. Past supply shocks show these spreading from one commodity to another; when sunflower oil becomes scarce, it drives up soyabean and palm oil prices, too. Those risks are also magnified through the interactions of different “systems” — in the present scenario, that would include both wars (Russia-Ukraine and US-Iran) and weather (El Niño and European heatwaves). A perfect storm from such interactions cannot be ruled out. All the more reason for policymakers to stay vigilant. The Modi government can be credited with reasonably insulating Indian consumers and farmers from the shortages in transport fuels, LPG, LNG and urea triggered by the West Asia war. Similar supply-side management may be required if the Kerch Strait becomes no less a cause for concern than Hormuz.