What the U.S. Should Do Now to Minimize the Risk of Global Food Shortages

April 7, 2022 18 min read Download Report

Authors: Daren Bakst, Max Primorac and Brett Schaefer

Summary

Congress and the Biden Administration can help to stave off a global food crisis—which could, if not properly handled, stoke famine, mass migration, and political instability. Although food assistance will be necessary, reflexively spending billions more dollars on food aid is not a solution. Instead, policymakers have a unique opportunity to remove bureaucratic regulations that impede food production and trade, adopt more rational food aid policies, and reverse course on a globally destructive energy policy that unnecessarily raises food prices.

Key Takeaways

Russia’s invasion of Ukraine has increased concerns about a global food shortage, which could cause widespread famine, mass migrations, and political instability.

While food assistance will be necessary, a long-term solution requires U.S. lawmakers to remove regulations that impede food production and trade.

U.S. policymakers also should adopt more effective food aid policies and reverse destructive energy policies that unnecessarily increase food prices.

Copied

Russia’s ongoing military campaign against Ukraine—which is threatening the upcoming harvest and planting seasons and has elevated prices for natural gas, which is used in manufacturing fertilizer—has raised concerns about a global food shortage. Pre-existing complications, such as lowered production and disrupted supply chains arising from the COVID-19 pandemic, have also contributed to these concerns.

The prospect of a global food shortage has raised the alarm in the global community. At the North Atlantic Treaty Organization (NATO) emergency summit in Brussels on March 24, President Joe Biden warned that a global food shortage is “gonna be real,” as prices continue to spike following Russia’s unprovoked invasion of Ukraine.REF The White House announced that it would “redouble our continued efforts to increase global food security and provide direct food aid…to our partners worldwide” in a joint statement with European Commission President Ursula von der Leyen.REF

In early March, Congress approved $13.6 billion in aid for Ukraine, $2.65 billion of it in food and nonfood emergency assistance and $1.4 billion in refugee assistance.REF While a much-needed relief for Ukrainians, this assistance will do little to resolve the risk of a global food shortage. To address a broader crisis, the U.S. should remove barriers to U.S. food production, reduce energy-related costs of agriculture, oppose restrictions on trade in commodities, and adopt reforms to maximize the flexibility and cost effectiveness of U.S. food assistance.

Factors Contributing to a Potential Global Food Shortage

Even before Russia invaded Ukraine on February 24,REF global food prices were increasing.REF According to the Food and Agriculture Organization’s (FAO’s) Food Price Index, food prices in February 2022 were “up 5.3 points (3.9 percent) from January and as much as 24.1 points (20.7 percent) above its level a year ago. This represents a new all-time high, exceeding the previous top of February 2011 by 3.1 points.”REF The Russian invasion of Ukraine has exacerbated these global problems, and could lead to a food shortage.

Many countries, especially in the Middle East and North Africa, look to Ukraine and Russia for key crops, such as wheat and corn.REF Agricultural imports from Ukraine and Russia are also important to Europe. According to the International Food Policy Research Institute, “Russia and Ukraine exports account for about 12% of total calories traded in the world” and “are among the top five global exporters for many important cereals and oilseeds, including wheat, barley, sunflowers and maize. Ukraine is also an important source of sunflower seed oil, supplying about 50% of the global market.”REF The war has driven global prices higher by restricting export of stored food and threatening future crop production.

Ukraine is having difficulty exporting its stored commodities due to Black Sea ports being blocked by Russian forces.REF To address this problem, Ukraine is trying to export commodities by train, which is more expensive than and not as efficient as transport by ship.REF Harvesting crops is also currently difficult in Ukraine and, if the conflict continues, it will likely be difficult for Ukrainian farmers to plant or harvest crops in parts of the country under threat of conflict. The FAO estimates that

between 20 and 30 percent of areas sown to winter crops in Ukraine will remain unharvested during the 2022/23 season, with the yields of these crops also likely to be adversely affected. Furthermore, considerable uncertainties surround Ukrainian farmers’ capacity to plant crops during the fast-approaching spring crop cycle.REF

The war and the West’s response to it has also affected fertilizer prices. Russia is a major exporter of fertilizer and a major source of natural gas, which is used to manufacture fertilizer. Russia recently suspended fertilizer exportsREF and many countries, including the United States, have placed sanctions on Russia that have disrupted exports of Russian fertilizer.REF Belarus, an important potash fertilizer exporter,REF has also been hit with sanctions.REF These developments will increase fertilizer prices, which were already extremely high before the war. Any fertilizer price increases are likely to hit developing countries especially hard and will make it more difficult for other countries to make up for global commodity shortfalls.REF

Responding Effectively

In a bipartisan op-ed, co-chairs of the Senate Hunger Caucus Jerry Moran (R–KS) and Sherrod Brown (D–OH) assert: “Right now, 45 million people across 43 countries are on the brink of famine.”REF The United Nations World Food Program (WFP), which relies on Ukraine for 50 percent of its commodities, avers that the addition of millions of Ukrainian refugees threatens to drive worldwide hunger to “catastrophic” levels.REF The WFP reported that “at least 155 million people in 55 countries faced acute hunger in 2020—20 million more than 2019.”REF The war in Ukraine has made this already serious problem worse.

The U.S. has responded generously to hunger around the world, including in Ukraine. The U.S. is by far the largest donor of humanitarian assistance worldwide.REF Since 2021, the U.S. “has provided over $1.1 billion in economic, health, democracy and human rights, and humanitarian assistance to the Europe and Eurasia region.”REF The U.S. also, historically, is the WFP’s largest donor and the U.S. provided more than 39 percent of total contributions in 2021.REF In addition to the U.S. government response, American churches and faith-based organizations have been first in line uto respond to the new refugee crisis in Ukraine, and for decades have responded to world poverty and hunger around the world with billions of dollars in private donations.REF

While the situation will continue to worsen as long as the conflict continues, there is still time to mitigate the effects on global food prices and supplies. An effective response by U.S. policymakers should be multifaceted and remove or oppose policies that will worsen potential food shortages and lessen the effectiveness of U.S. assistance to affected people around the world. Specifically, the U.S. should:

Discourage export restrictions on food and fertilizer. Some countries will respond to food supply concerns by imposing export restrictions to try to hoard their domestic supplies of key agricultural commodities and fertilizer. As recent history has shown, these actions increase prices by reducing supply, lead to shortages, and hurt low-income importing countries.REF The United States should lead efforts to discourage the imposition of export restrictions on food and fertilizer, a problem that is already occurring in response to the war.REF The G7 pledged, “We will avoid export bans and other trade-restrictive measures, maintain open and transparent markets, and call on others to do likewise.”REF This is the right policy, and the U.S. should take the lead.
Free up fallow land. The U.S. Department of Agriculture’s Conservation Reserve Program (CRP) pays American farmers to not farm their land. As a result, farmland that could be used for growing crops remains fallow. To head off a potential food shortage, farmers should, without penalty, be able to grow crops on idle land in time to increase production this year.REF Unfortunately, the U.S. Department of Agriculture recently rejected efforts to allow idled CRP land to be used to help prevent a global food shortage.REF Therefore, Congress should address this issue itself and should temporarily suspend any other federal programs that are discouraging the use of productive farmland. The European Union has already taken similar action.REF
Remove countervailing duties on Moroccan fertilizer and refrain from imposing new duties on fertilizer from Trinidad and Tobago. Recently, the United States imposed countervailing duties—taxes on imports that have been subsidized by the governments of the origin countries—on Moroccan phosphate fertilizer imports.REF These “fertilizer taxes” were questionable in the first place. Considering the war’s impact on fertilizer prices, Congress should repeal these duties and also suspend U.S. efforts to impose duties on urea ammonium fertilizer from Trinidad and Tobago.REF
End the restrictions on extraction and use of natural gas. The Biden Administration has taken numerous actions to restrict extraction of natural gas, including effectively banning leasing for natural gas exploration and production on federal lands and the Outer Continental Shelf.REF These actions drive up natural gas prices and, independent of the war and concerns over food supplies, should be rejected. But the current situation provides an additional reason to stop restricting access to natural gas: More than 56 percent of fertilizer used in farming globally is nitrogen fertilizerREF and natural gas is a critical input for this fertilizer, accounting for 70 percent to 90 percent of its manufacturing cost.REF Artificially restricting natural gas production worsens the current situation.
Remove mandates that lead to crops being used for fuel, not food. Congress and the Administration should eliminate the Renewable Fuel Standard, which mandates that U.S. transportation fuel contain a minimum amount of biofuel.REF This requirement leads to crops, such as corn and soy, being planted with an eye toward being used for fuel instead of meeting food (or feed) demand.REF By removing the mandate, crops can be planted and ultimately used to meet demand, be it for fuel or food.REF This would not only likely lead to greater supplies of food, but also potentially reduce prices at the pump, particularly in the long term.REF
Support multilateral humanitarian efforts with prudent vetting. The U.S. has provided and should continue to provide resources to alleviate the humanitarian crisis in Ukraine and support WFP efforts to address hunger worldwide. However, humanitarian agencies should not receive a blank check. There is the significant problem of aid diversion to criminal and terrorist enterprises in nonpermissive environments, such as in YemenREF and Syria,REF that caused the U.S. Agency for International Development (USAID) to institute a set of comprehensive terrorism-vetting policies of key personnelREF following a critical Inspector General report.REF And food aid—essentially free food—should not undercut local farmers or subsidize bad agricultural policies and create long-term aid dependence.
Eliminate U.S. procurement and shipping rules that unnecessarily increase the cost of food aid. The U.S. provides food assistance in kind, as well as through market-based aid (that is, cash, vouchers, and funding for local and regional food purchases). Most countries now use market-based aid, but the U.S. still provides over 40 percent of its food assistance through in-kind aid.REF This increases the cost, because food must be shipped to the destination. Costs are further increased because of requirements that 50 percent of all in-kind aid be shipped on U.S.-flagged ships. Ending these requirements will not prohibit using U.S. food in assistance efforts or shipping on U.S.-flagged vessels when doing so is cost effective, but would provide maximum flexibility for U.S. food assistance and ensure that each dollar is used most effectively.REF
Resist calls to use costly assistance mechanisms. The U.S. Senate is pressing the Administration to tap into the $260 million Bill Emerson Humanitarian Trust, which was established to allow USAID to respond to unanticipated food crises abroad. The trust was last used in 2014 to provide $50 million in emergency food aid to South Sudan.REF The trust restricts contracts to U.S. farmers and shippers, thereby tripling program costs. For South Sudan, the estimated additional costs of using the trust were $130 million.REF In addition, Congress should revisit the legislation authorizing the trust to eliminate it or reform it to eliminate U.S. purchase and shipping requirements.

Conclusion

Congress and the Biden Administration can help to stave off a global food crisis—which could stoke famine, mass migration, and political instability. Although food assistance will be necessary, reflexively spending billions more dollars on food aid is not a solution. Instead, U.S. policymakers should seize the unique opportunity to take immediate steps to remove bureaucratic regulations that impede food production and trade, adopt more rational food aid policies, and reverse course on a globally destructive energy policy that unnecessarily raises food prices.

Daren Bakst is Senior Research Fellow for Regulatory Policy Studies in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation. Max Primorac is Senior Research Fellow for International Economics and Foreign Aid in the Douglas and Sarah Allison Center for Foreign Policy at The Heritage Foundation. Brett D. Schaefer is Jay Kingham Senior Research Fellow in International Regulatory Affairs in the Margaret Thatcher Center for Freedom at The Heritage Foundation.