Good evening,
Two Financial Times reports from opposite sides of the world highlight the severe stresses on global food production from the shock of coronavirus followed by the war in Ukraine.
In China, strict Covid lockdowns are exacerbating shortages of fertiliser, labour and seeds just ahead of the crucial spring planting season. Particularly badly affected are northeastern Jilin, Liaoning and Heilongjiang provinces, which together account for more than 20 per cent of the country’s grain production.
In the UK, a new parliamentary report says the UK food industry may shrink permanently if the government fails to address labour shortages resulting from the double whammy of coronavirus and Brexit. These shortages are likely to lead to “wage rises, price increases, reduced competitiveness and, ultimately, food production being exported abroad and increased imports”, the report says.
Farmers are under pressure right across Europe as the cost of animal feed, fertiliser and fuel soars, a situation made worse by the Ukraine crisis. The EU gets half its corn from Ukraine and a third of its fertiliser from Russia.
“It’s the four Fs: feed, fertiliser, fuel and financing. The war in Ukraine has had a huge knock-on effect for farmers,” said one grain trader.
Brussels is easing state aid rules to support EU farmers as well as allowing access to a €500mn crisis fund, but final approval needs to come from national governments and the European parliament, a process that could take weeks.
Arab nations are badly affected too, particularly countries such as Lebanon, which gets 70 per cent of its wheat imports from Ukraine. Egypt, the world’s largest wheat importer, relies on Russia and Ukraine for more than 80 per cent of the wheat it buys on international markets.
Fertiliser prices, which hit record levels last month, are an increasing worry. Russia is a key exporter of nitrogen, phosphate and potash fertilisers. The situation is also being made worse by a lack of competition in the US fertiliser industry.
World Trade Organization chief Ngozi Okonjo-Iweala told the FT recently that governments risked repeating mistakes of earlier food crises by imposing export controls as commodity and energy prices spiralled. She urged governments with surplus stocks of products such as vegetable oils and grains to release them on world markets.
The UN’s food price index has already risen by 24 per cent from a year ago and is set to rise further. This means higher grocery bills in richer countries that have already been hit by the highest inflation in decades. But in poorer countries, the FT editorial board notes, higher prices mean catastrophe. And given how badly the world has done in distributing vaccines equitably, the omens for how it will deal with a food crisis are not good.
Nobel economist Amartya Sen once said that famines could not happen in a democracy because of the free flow of information and consequent public outrage, the FT notes. “But democracy is ever more under attack,” it concludes. “Putin is the latest aggressor. Unless he is stopped, hunger will follow.”
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Need to know: the economy
The value of global trade fell 2.8 per cent between February and March as the Ukraine crisis hit container traffic, according to new data. As well as affecting Russia and Ukraine, the war has knocked the EU badly, reducing exports by 5.6 per cent and imports by 3.4 per cent in March. In the US, exports were down 3.4 per cent and imports down 0.6 per cent, while the impact on China was negligible.
Latest for the UK and Europe
Chief economics commentator Martin Wolf said it was time to curb imports of Russian gas, arguing that although the effect on Europe could be substantial it had been exaggerated. New estimates show turning down the thermostat 1C-2C in residential and commercial buildings across Europe could cut dependence on Russian gas by almost 10 per cent.
Current sanctions have yet to dent the number of crude oil tankers leaving Russia, especially those heading for the key Indian market. Other options being discussed by EU ministers today include a ban on Russian coal imports.
The UK is creating a new body to take over some responsibilities from the National Grid in overseeing the country’s energy system as it moves away from fossil fuels. The announcement comes ahead of tomorrow’s wider announcement on energy security.
New FT columnist Stephen Bush says the way workers have reacted to trends in hospitality, such as the move away from cash tips, offers broader pointers for the development of politics.
Global latest
Inflation in OECD countries reached a 30-year high of 7.7 per cent in February, even before the fresh hit to the global economy from the Ukraine crisis, with energy and food prices being the main culprits. The head of the Bank for International Settlements said higher inflation looked set to last, posing long-term problems for central banks and risking a “dangerous wage-price spiral”.
Fed governor Lael Brainard said the bank would begin a “rapid” reduction of its balance sheet as soon as May and take “stronger” action to bring down inflation by raising interest rates. More hints should come in the minutes from the Fed’s last policy meeting, which are due to be published later today.
The US services sector grew in March as the impact of the Omicron variant of coronavirus began to fade. US motorists, so far at least, seem to have taken the shock of $4 a gallon petrol in their stride, writes Justin Jacobs in our Energy Source newsletter.
In contrast to the US, services sector activity in China shrank by the most since the start of the pandemic, as the country battled its worst outbreak of infections so far.
More than 100mn children’s Covid doses will be included in the US pledge to provide 1.2bn jabs to poorer countries. The US Senate is close to reaching an agreement on an extra $10bn to help fight the pandemic.
The World Bank cut its forecasts for economic growth in East Asia and the Pacific this year to 5 per cent, from 5.4 per cent, because of the shock caused to commodity markets by the war in Ukraine and the slowdown in China.
Political chaos is growing in Sri Lanka after the country’s new finance minister quit after just 24 hours in post. A wave of protests over energy blackouts, soaring prices and shortages first hit the government of strongman president Gotabaya Rajapaksa last month. The country is facing a foreign exchange crisis and its currency has plunged to a record low.
Need to know: business
The FT revealed that new names on the EU sanctions list would include Herman Gref, the head of Russia’s biggest bank, and aluminium oligarch Oleg Deripaska.
The UK will be the setting for Uber’s “superapp” push, which will add trains, coaches, flights and possibly hotels to its car booking service for a “seamless door-to-door experience”. The tech sector and its drive for innovation features strongly in our annual ranking of The Americas’ Fastest-Growing Companies.
Shell paid no tax on its oil and gas production in the UK’s North Sea for the fourth consecutive year, even as fuel prices rocketed. The company instead received $121mn from the UK government as rebates for decommissioning old oil platforms.
New car sales in the UK hit their lowest level since 1998 as the global semiconductor crisis dented output. The shortage, which is not expected to ease until next year, has also transformed the second-hand market, driving used car prices above new models. VW is moving away from its “people’s car” origins by scrapping dozens of models to focus on more profitable, premium vehicles.
The chief executives of Pfizer, BioNTech and Moderna together received more than $100mn in pay during the pandemic, reflecting the huge commercial success of their mRNA Covid-19 vaccines. Pfizer’s stock price is up 60 per cent over the past 24 months, while the value of BioNTech and Moderna’s shares have tripled and increased by five times, respectively. In China, shares in a traditional medicine company have surged after Hong Kong promoted its Covid-19 treatments.
The UK’s aspirations to become a “global hub” for cryptocurrencies get the once-over from FT Alphaville’s Jemima Kelly. See also our Big Read on Blockchain and financial markets: Will computers push out brokers?
The World of Work
The experience of “essential workers” during the pandemic showed that robots could not resolve problems like a shortage of truck drivers, writes columnist Sarah O’Connor. In that context, the victory for trade union organisers at Amazon’s warehouse in New York could mark a turning point in the US labour movement, she argues.
In the new edition of our Working It podcast, O’Connor and Taylor Nicole Rogers discuss the Great Resignation and why millions are quitting their jobs, working less, or declaring themselves anti-work.
Our Working It newsletter launched today and you can see the first one on our website, where you can also sign up to receive it every Wednesday.
Our annual survey to find Britain’s healthiest workplace is open for nominations. Employees are invited to show what they are doing to improve the physical and mental condition of their staff and share their best practices for improved wellbeing.
Get the latest worldwide picture with our vaccine tracker
And finally . . .
Fancy swapping those city pavements for hills and fields? Find out how FT journalist and avid urban runner Laura Noonan got on at a trail running retreat.