How Russia’s invasion of Ukraine means there’s less to eat in Bangladesh

In September 2022, the average retail price of wheat flour was Tk52 per kilogram, which was approximately 126% higher than the price in January 2020

Prices for food, fuel, and fertilizer around the world have been rising rapidly in recent months due to the Ukraine war and other associated global factors. The status quo has been further aggravated due to sanctions imposed on Russia. Since the global trade of staple foods such as wheat and vegetable oils, along with fertilizers, are disrupted, heavy impacts are falling on low and middle-income countries like Bangladesh. The Ukraine war's impact on supply chains has already shocked Bangladesh's commodity market quite visibly.

Rice has historically accounted for a large portion of the calorie intake by Bangladeshi people (about 68% of total calories). Alongside, wheat has been an increasingly important food source (about 7% of total calories). Wheat consumption has tripled since the year 2000 and Bangladesh imports more than 80% of its wheat needs -- with more than half coming from Russia and Ukraine. Changes in global pricing have a considerable impact on domestic wheat prices because the supply of wheat grain is heavily dependent on imports.

The price of wheat flour has increased sharply in the domestic market. The price of wheat flour has risen to an eight-year peak. In September 2022, the average retail price of wheat flour was Tk52 per kilogram, which was approximately 126% higher than the price in January, 2020. 

Bangladesh will need to identify alternate sources now that those sources have been disrupted -- our country has purchased wheat from other exporters, including Australia and India, in the past. Public sector imports and subsequent sales of both rice and wheat at official prices may reduce the transmission of international prices to the domestic market. 

Ukraine and Russia account for about 75% of the world's sunflower oil export. While Bangladesh does not import sunflower oil, the war has increased prices across the entire vegetable oil complex. Bangladesh imports almost all of its vegetable oil needs either in the form of raw or processed products (primarily palm oil and soybean oil) or imported oilseeds (rapeseed and soybeans), and processes it all domestically.

Bangladesh imports 80% of its palm oil from Indonesia as well. The worldwide market's overall supply of palm oil and its derivatives may be constrained by Indonesia's implementation of a progressive export levy in March. About two-thirds of Bangladesh's imports of soybeans come from Argentina. Argentina imposed export restrictions on soybean oil and meal on March 13 before changing course on March 31 and allowing exports while increasing the export tariffs on those products from 31% to 33%.

All of these factors have kept vegetable oil prices at record levels and increased import costs for countries like Bangladesh. As of September 2022, the average retail price of soybean oil has increased by 82.85% compared to the price in January 2020. 

Fertilizer use is crucial to Bangladeshi agriculture, especially for the production of rice, as over 286 kg/hectare is applied on average. Bangladesh imports over 1.2 million tons of fertilizer each year, including 31% of nitrogen needs, 57% of phosphate needs, and 95% of potash needs. Russia and Belarus are major global fertilizer exporters, and the war -- including export sanctions aimed at Russia -- has disrupted these markets. Nearly 75% of the country's potash needs are met by imports from Belarus (34%) and Russia (41%). Fertilizer price increases may cause some farmers to reduce their use of this input, resulting in lower agricultural output and higher food prices (IFPRI found that a 100% increase in real fertilizer prices leads to a 15% decline in fertilizer use).

Due to food, fuel, and fertilizer shocks, national consumption spending -- including the value of home consumption -- falls by 4.7% and both rural and urban households experience declines in consumption. The fall in consumption is much larger for poorer and rural households. While urban households primarily experience higher food and fuel prices, rural households experience both rising prices and declining income. Rural households depend more heavily on farming for their income; thus, they are adversely affected by the decline in agricultural production following the price hike in fertilizer. The indirect impacts of the fertilizer shock on the food supply have an impact on poor households, including those in urban areas. 

According to the most recent household survey in Bangladesh, 14% of the country's population has an adult equivalent consumption level that falls below the $1.90 poverty line. The rise in global prices causes a 3.3% point increase in Bangladesh's national poverty rate, equivalent to an additional fiive million people falling below the poverty line.

The price hike in food and fertilizer accounts for the majority of the rise in poverty.

Price hike in food items also accounts for the deterioration in diet quality and dietary diversity. People are deemed “deprived” in a food group if they consume fewer calories from that food group than the healthy reference diet recommends. More than 32 million people (23.6 million rural and 8.6 million urban residents) are deprived of at least one more food group for a healthy diet as a result of rising food prices.

The conflict in Ukraine and the ensuing world crises may present our nation with some new opportunities. For example, by boosting agricultural output, we may export a variety of agricultural products like rice and vegetables and thereby get entrance to the world market. Opportunities are there, we need to identify those and harvest smartly. 

Ahmed Jubayer is Researcher (Economic Division), Bangladesh Institute of Social Research (BISR) Trust.