[Food Security Crisis] Agflation Threat... The World Closes the Food Gate

Wheat, Corn, Soybeans... Export Restrictions on Major Food Crops
Grain Supply Shortage → Direct Impact on Price Increase of Primary and Secondary Processed Products

[Asia Economy Sejong=Reporter Son Seon-hee] It is not a recent phenomenon that major global agricultural product exporting countries are showing ‘restrictive’ movements on grain exports to secure their own food security. Since the outbreak of the COVID-19 pandemic in 2020, some countries in the Middle East such as Oman, and in Asia such as Tajikistan and Kyrgyzstan, have early imposed ‘indefinite’ export bans on key grains like wheat, corn, and rice. Then, the Russia-Ukraine invasion that broke out earlier this year became a trigger that awakened the world to the urgency of ‘food security.’ When the war broke out, more than ten countries locked down key grains without exception.

According to the Ministry of Agriculture, Food and Rural Affairs on the 28th, as of the 25th of this month, 16 countries including Russia and Ukraine have imposed export bans or permit systems and other restrictive measures on major agricultural and livestock products. This trend has especially rapidly expanded since Russia’s invasion of Ukraine. The export-restricted items have spread from food grains such as wheat, corn, barley, oats, and soybeans to primary processed products like sunflower oil and palm oil. As the international community imposed import-export sanctions on Russia, which has served as an international ‘food warehouse,’ food security has become a hot topic, especially among countries highly dependent on imports.

A representative case is Indonesia’s recent palm oil export ban. When Indonesia, the world’s largest exporter of palm oil, suddenly declared an export halt, it immediately shocked many importing countries including South Korea. The price of imported palm oil surged sharply, and processed food companies using palm oil, such as those producing snacks and ramen, rushed to secure inventory, creating an urgent situation.

The government explains that the background to Indonesia’s strong measures lies in the Russia-Ukraine situation. Ukraine is the world’s largest producer and exporter of sunflower oil, accounting for 43% (5.97 million tons, average over 2018?2020) of global exports. Russia also exports 2.8 million tons annually, representing 20%. Together, these two countries account for 63% of the sunflower oil export market. As the largest sunflower oil suppliers stopped exports due to the war, international edible oil prices soared. Consequently, Indonesian palm oil exporters excessively sold volumes at high prices, causing domestic shortages, which led the government to take the extreme measure of a ‘forced export ban.’

At present, it is difficult to predict how long Indonesia’s export restrictions will continue, and the lack of an immediate ‘Plan B’ is problematic. Furthermore, it is hard to foresee when and where similar export bans might be imposed next. A Ministry of Economy and Finance official overseeing the overall supply chain situation of import and export items said, “It is a very difficult situation, but we currently hold 3 to 6 months’ worth of inventory, so there will be no immediate disappearance of goods from shelves or supply problems,” while expressing concern that “the fact that such issues are sporadically occurring recently, not only with palm oil, is problematic.”