Open Markets Critical for Food System Resilience Amid Global Crises

The global food system is highly vulnerable to shocks, and the events of 2022-23 serve as a stark reminder. Overlapping crises caused by Russia's invasion of Ukraine, economic fallout from the pandemic, and extreme weather events led to soaring food prices that pushed over a quarter billion people to acute levels of hunger.

Grain, energy, and fertilizer markets suffered simultaneous shocks, with the world's poorest countries in Sub-Saharan Africa being hit hardest due to their high vulnerability. Natural gas is crucial for producing ammonia, which is then processed into urea, the world's most widely used nitrogen fertilizer. As natural gas prices surged, fertilizer production costs rose sharply.

In response to rising prices and supply concerns, many countries imposed export restrictions in an effort to protect domestic consumers. In 2022, export restrictions covered 11% of pre-pandemic global food trade, up from 3% before the pandemic. However, this disrupted trade flows and reduced global availability just as energy costs made production more expensive.

The combination of sustained demand and restricted global supply meant fertilizer markets remained tight long after food trade flows had adjusted. The experience suggests that export restrictions intended to insulate markets ended up increasing price volatility, while resilience in the food markets came from the ability of farmers, traders, shippers, and importers to adapt.