In a Twitter post last week, David Beasley, the Executive Director of the World Food Programme (WFP) said that the war in Ukraine would force food, fuel and shipping costs to “skyrocket” – adding that the situation was “an absolute catastrophe”.
Ukraine’s pumelled infrastructure
What started off as military presence on Ukraine’s borders has now turned into war being waged on Russia’s neighbour. It’s uncertain how long the incursion will last. We can, unfortunately, be more sure that the implications of the conflict will be long-lasting, as Moscow pummels Ukraine’s infrastructure. Between them, Russia and Ukraine supply almost a third of the world’s wheat exports – and many more basic foodstuffs.
Together they account for about 29% of global wheat exports, 19% of world corn supplies and 80% of world sunflower oil exports. And yet, ports on the Black Sea have come to a virtual standstill. As a result, wheat prices have soared to record highs, overtaking levels seen during the food crisis of 2007-08.
Yara’s supply chain dilemma
Similar sentiments were then echoed by Yara International’s boss (Norwegian crop nutrition company). Svein Tore Holsether warned, “Half the world’s population gets food as a result of fertilisers… and if that’s removed from the field for some crops, [the yield] will drop by 50%”. Yara is facing a huge conundrum: keep sourcing phosphate – a key crop nutrient – from Phosagro and other fertiliser components (such as potash) from Uralkali, at a crucial stage in the agricultural season. Both these producers are in Russia. Or boycott Russian raw materials altogether, knowing that this could have dire consequences for global food supply, and a likely increase in food insecurity in poorer countries. Compounding the dilemma is the fact that Yara International also currently relies on vast quantities of Russian gas for its European plants.
“On the one hand, we’re trying to keep fertiliser flowing to the farmers to keep up the agricultural yields,” explains Yara’s Svein Tore Holsether. “At the same time… there has to be a strong reaction. We condemn the Russian military invasion of Ukraine so this is a dilemma and one that frankly is very difficult.”
Vast, fertile farmlands
As I mentioned in my previous blog, Ukraine is known as a ‘bread basket’ thanks to the vast, fertile farmlands of the Black Sea region. Ukraine accounts for 90 per cent of Lebanon’s wheat imports and is a leading supplier for countries including Somalia, Syria and Libya. While Russia accounts for a large chunk of Egypt and Turkey’s wheat imports. Given bread’s role as a politically-charged commodity in this part of the world, further strain on wheat supply and escalating prices has the potential to spark unrest.
Against this backdrop of needy recipients, in the short term, Ukrainian farms may struggle to spread fertilisers and plant seeds for the spring crop. In the long term – that’s harder to predict. But, the world must now look for new agricultural land to start cultivating its own wheat, grain, sunflower and barley.
Europe arms itself
On a side note, in times of war demand for other raw materials surges – as nations arm themselves as a protective measure. Germany, for example, has pledged €100 billion ($112.7 billion) of its 2022 budget for the armed forces. This marks a major defence policy shift. This will call for more super strength metals – like titanium and vanadium – associated with military equipment. What’s more, the titanium supply chain goes through Russia. Interestingly, Boeing has just announced its suspended the buying of titanium from Russia – a key component in aerospace manufacturing.
Strategic importance
This is no doubt the subject of another article altogether. But it does help illustrate the point that the world is in desperate need of rapid alternative options. Creating new producers of basic foodstuffs is a Herculean task, one that has to happen quickly to avert or at least limit the damage of the ‘catastrophe’ experts are warning of. And one that will need extraordinary quantities of phosphate for fertilisers. This Norway – and therefore Norge Mining’s resource – has in large quantities. Our Storeknuten licence area has been confirmed as a world-class deposit of the three EU Critical Raw Materials: phosphate, vanadium and titanium. These raw materials have always held huge value – and, as Russia’s invasion of Ukraine intensifies by the day, so too does their strategic global significance.
