How the West can win Putin’s war on food

The West could easily make up the shortfall if it let the free market rip, says Matthew Lynn.

Most of the West has already started to wean itself off Russian oil, and may soon be able to switch off the gas pipelines as well. But although we may be able to do without Russia’s energy, food is a different matter. It is becoming increasingly clear that Vladimir Putin is weaponising food supplies as part of his war on the West. Very soon there may be widespread shortages.

Both Russia and Ukraine were the world’s breadbaskets. Between them, the two countries supply 28% of globally traded wheat, 29% of barley, 15% of maize, and 75% of sunflower oil. Add it all up and it comes to 12% of all the calories traded around the world. That is now at real risk.

Ukraine’s agricultural industry is being systematically destroyed by Russian forces and the Black Sea ports that were used to ship its grains to the rest of the world are either now in Russian hands or effectively blockaded. Russia’s exports are under the control of its government. Putin can hold the world to ransom. Indeed, he is already doing so. The price of wheat is up by more than 60% this year, and India has already banned all exports on fears that it will run out of grain to feed its own people. Very soon countries dependent on imported food could well be facing critical shortages, while prices soar elsewhere – and Russia can exploit that to its own advantage.

Making up the shortfalls

The truth, however, is that we could easily be making up that shortfall in production. Agriculture is the most heavily regulated, state controlled and politically managed industry in the world. For the last 30 years we have been doing everything we can to limit production. It is hardly surprising we have ended up so completely dependent on Russia and Ukraine. There are plenty of ways we could start to change that.

First, we should liberalise the rules on gene editing and genetically modified crops. The technology has been around for a couple of decades, but public opinion has been too squeamish to embrace it. Genetically edited wheats and barleys could have dramatically improved crop yields, would require less cultivated land and use less fertiliser. How much extra could we produce? No one knows for sure because right now the technology is so restricted there has been little incentive for anyone to invest in it. But it could easily be 20% to 30% more per acre – and that would make a huge difference.

Next, we should ease up the restrictions on fertilisers. The EU has spent the last five years steadily banning some of the most effective fertilisers and weed killers on flimsy environmental grounds, even though they are the most effective way of getting more crops out of every field. If we relaxed some of those restrictions, as well as making it easier for agro-chemical companies to come up with new types of fertilisers, we could dramatically increase yields.

Change the incentives

Finally, and perhaps most importantly, we should create a free market in agriculture. Within Europe, the Common Agricultural Policy has burnt its way through huge amounts of money, but has been aimed at supporting farming communities and protecting the environment, rather than trying to get more food out of the ground. Indeed, a lot of the time it pays farmers to grow less food instead of more (which is going to look like a very odd policy if there are serious grain shortages around the world). The UK might have left the EU, but so far we have shown very little interest in reforming agricultural policy to produce more. Meanwhile, countries such as the US and Argentina, both capable of producing vast amounts of grain, protect the industry with tariffs, leaving it unable to compete in the global market as effectively as it could, and reducing incentives to export more.

It is crazy that the world is dependent on Russian grain. We need to end that as soon as possible. There is plenty of land in the world to grow enough crops to feed everyone. With the right technology, and with free markets in agriculture, we could achieve that in just a few years – but it is not going to happen unless we start now.

SEE ALSO:
What war in Ukraine means for agricultural commodities

Russia, Ukraine and the coming global food crisis
Will the sanctions aimed at Putin have any effect?

 

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