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Morten W. Langer

tirsdag 24. maj 2022 kl. 19:06

Fra Gro Intelligence

At the United Nations Security Council’s May 19 session on conflict and global food security, Gro Intelligence’s CEO, Sara Menker, spoke about the growing global food crisis, the confluence of unprecedented factors contributing to this crisis, and its disproportionate impact on lower-income countries.

Watch the livestream here.

This transcript has been edited for length and clarity.

Sara Menker: It is an honor to be here today to highlight and reaffirm that food security is, in fact, national security and global stability.

Before I share some data-driven insights on the state of our global food systems, let me tell you a little bit about Gro Intelligence. Gro is a company founded to help tackle two of the greatest challenges we face as humanity: food security and climate change. We are a global company with offices in Nairobi, Singapore, and New York. Our team comes from over 40 countries that range from Ethiopia, where I am from, to Russia, Nigeria, India, the United States, China and Ukraine. We are a company of domain experts in software infrastructure, climate science, agronomy, trading, and financial markets. We combine that with world-class engineering and AI talent. We work with large and small companies. We work with financial institutions, and we work with multiple governments.

I come here today to share insights from our data, with the underlying hope that all of us here with the power to change the course of history will choose to do so.

I want to start by explicitly saying that the Russia-Ukraine war did not start the food security crisis. It simply added fuel to a fire that was long burning. A crisis we detected tremors from long before the COVID 19 pandemic exposed the fragility of our supply chains.

I share this because we believe it’s important for you all to understand that even if the war were to end tomorrow, our food security problem isn’t going away anytime soon without concerted action.

Now on to the statistics: Gro Intelligence estimates show that price increases in major food crops year to date has made an additional 400 million people food insecure. There are a few food security statistics shared so I want to define this as the number of people at $3.59 a day. To put this into perspective, that is equivalent to the number of people that China has taken out of poverty in the last 20 years. In five months, we have undone 20 years of progress.

Furthermore, our economic shock models show that year to date changes in prices of agricultural products have already affected some economies by three to 5% of their GDP. Countries disproportionately affected are in regions such as North Africa, the Middle East, the Horn of Africa and West and Central Asia.

And it can get much worse. Data shows the food security challenges we face will last several years.

There are five major challenges occurring simultaneously that are each individually extraordinary. Lack of fertilizer, climate disruptions, record low inventories in cooking oils, record low inventories of grains, and logistical bottlenecks that have already started to unravel decades of global economic progress.

Without substantial immediate and aggressive coordinated global actions, we stand the risk of an extraordinary amount of both human suffering and economic damage. This isn’t cyclical, this is seismic. It’s a once in a generation occurrence that can dramatically reshape the geopolitical era.

Fertilizers

Global fertilizer prices have nearly tripled year on year and quadrupled over the past two years because of supply shocks driven by logistical bottlenecks, restrictions on natural gas which impact the ability to produce fertilizer, and sanctions and export restrictions amidst the Russia Ukraine war. This risks significant crop yield reductions in key producing regions, such as Brazil, the United States, and Western Europe later this year and next year, severely impacting global food security and inflation for the next three to five years at a minimum.

Climate

Global drought conditions for wheat are the worst in over 20 years around the world. Major bread baskets such as the United States and Brazil, the world’s two largest exporters of agricultural products, are also experiencing extreme droughts. For example, Brazil’s cropland soil moisture is at a 20 year low. Major grain importers in the Middle East and Africa are also experiencing record droughts. Namely, we have both major importers and major exporters experiencing exceptional drought conditions.

Cooking Oils

The price of traditionally cheap palm oil has nearly tripled in the last two years. Driven by increased biofuels demand, drought in regions that produce alternative cooking oils such as Brazil and Canada, record import demand from China and the loss of nearly 75% of global sunflower oil exports due to the Russia Ukraine war. The recent export ban in Indonesia, the world’s largest palm oil producer, who is responsible for 60% of global production has added significant upward price pressure to vegetable oils.

Grains

Official government agency estimates from around the world put wheat inventories at 33% of annual consumption. Verifiable data from public and private sources that we as a company organize and then build statistical models to connect the dots between in our platform show that global wheat inventories are in fact closer to 20%, a level not seen since the financial and commodity crisis of 2007 and 2008. We currently only have 10 weeks of global consumption sitting in inventory around the world. Conditions today are worse than those experienced in 2007 and 2008.  It is important to note that the lowest grain inventory levels the world has ever seen are now occurring while access to fertilizers is highly constrained, and drought in wheat growing regions around the world is the most extreme it’s been in over 20 years. Similar inventory concerns also apply to corn and other grains. Government estimates are not adding up.

Logistics

Russia and Ukraine used to provide nearly a third of the world’s wheat exports and are in the top five exporters of corn globally. Combined, they used to export 75% of global sunflower oil supplies. All Ukrainian ports remain closed, making it impossible to move any of Ukraine’s harvested grain across its borders. Shifting to rail will move less than 10% of the prewar flow. It’s not enough. Russian exports, which also include fertilizer, are limited because of Black Sea maritime hazards.

Any one of the five things I outlined would be considered a major issue in commodity markets. The five combined are truly unprecedented. 

I come here today not to specifically offer or provide solutions, as there will be other venues to do so. But rather to X-ray and diagnose the problem for those of you in this room that have the power to change the course of our history. In a world that is increasingly isolationist, we need to come together. Food is personal. But our agricultural systems are global.

There is no version of the world where every country has all the natural resources it needs to survive and thrive. One key takeaway from our data is how often we see repeated examples of cause and effect, highlighting surprising connections and interdependencies. For example, in the United States, the most self-sufficient country globally, a consumption-weighted basket of food – a grocery basket – has doubled in price since April of 2020. Price increases were driven by unprecedented demand around the world, which increased alongside climate related supply side shocks. We cannot solve food insecurity on a national scale anywhere.

One thing we strongly believe is we can have a healthy economy and secure food system without degrading our environment. We have the capability to help everyone feel secure about having enough food. Data helps us navigate because we aren’t blind to food security related risks and outcomes. We can’t say we didn’t know.

There are positive solutions and approaches that can be offered and delivered but they will require coordinated global effort. We are all dependent on one another.

What does the data tell us about risk and interdependencies? It tells us not unlike the global financial crisis of 2008 there are fault lines and tremor-like early warning signals that are seemingly disconnected globally, but they aren’t.

What does the data tell us about hope? It tells us that while the next few years are going to likely be difficult as a result of this statistically unusual confluence of the five challenges I shared, we can coordinate a global response, eschew a ‘to each their own mentality’ as to food security and climate risk, be willing to have constructive, albeit difficult, conversations, and jointly accept that what we have to address is less of a food shortage and more of a crisis of prioritization.

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