Russia’s invasion of Ukraine evidences why sustainable solutions in the agriculture sector are more resilient

23 Mar 2022 --- The impact of the Russia-Ukraine war has had prominent impacts on the food and farming sectors. Organic farmer and financier Rob Appleby, founder of sustainable agri-food investment firm Cibus Fund, reflects on why progressive and sustainable solutions will fare better through the current crisis and beyond. 

“At Cibus Fund, we have for years preached that food and farming is undergoing a period of systemic change,” he remarks. “We channel capital towards companies charting the future of food, using innovative technology to disrupt food production, increase resource efficiency and ensure sustainability.”

“Therefore, it comes as no surprise to learn that food companies relying on these high levels of fossil fuel inputs, using inefficient supply chains to grow in areas of cheap labor, and using low-cost inputs are being affected by the current challenges.”

In contrast, he notes that among the less directly affected companies are those that are running efficiently, supplying locally grown produce for local consumers, and substituting fossil-fuel derived inputs with biological inputs.

“The dramatic rise in price of artificial inputs will accelerate the uptake of biological solutions, which are increasingly attractive to farmers who have the cost of goods sold with a much lower correlation to fossil fuels.”

Following on the heels of the COVID-19 pandemic, a devastating second crisis in two years has disrupted supply chains, raising fertilizer and food prices once again.Back-to-back crises
Following on the heels of the COVID-19 pandemic, a devastating second crisis has disrupted supply chains, raising fertilizer and food prices rise once again. “Fertilizers have gone from roughly £265 [US$351] per ton to £1,000 [US$1,323] per ton, with limited availability,” adds Appleby.

“Gas prices have gone from £0.60 [US$0.79] to £2.50 [US$3.31], a four-fold increase. And the increase in price of arable proteins for livestock may lead to the rise of price in meat production soon. We expect intensive meat production to decrease, as farmers reduce their risk.”

According to new RaboResearch analysis, malting barley prices in western Europe are currently 50% above levels seen a year ago. This is anticipated to have a major impact on maltsters, for whom barley inputs make up 65% of costs.

Similarly, the price of wheat is skyrocketing. These circumstances were previously referred to by UN secretary-general Antonion Guterres as the advent of a “hurricane of hunger” and a “meltdown of the global food system.”

“The recent series of events continues to catalyze the movement towards a more sustainable production of food; the strategy upon which our platform was created,” Appleby reiterates.

“Those with progressive solutions for the agricultural industry that are cleaner, fairer, and more sustainable will see the greatest opportunities in their future.”

Russia’s economic retrograde
In order to better understand extent of the retrograde on Russia’s economic progress, it helps to reflect on historical events.

“In the Spring of 1990, Russia’s economic policies changed under the presidency of Mikhail Gorbachev and opened up the former Soviet Bloc to the world. Cold War relationships between Moscow and the West thawed,” remarks Appleby.

“The collapse of the Soviet Union the following year under Boris Yelstin radically transformed the face of Russia, and in turn, its agricultural architecture.”

Following the fall of the Soviet Union, Western entrepreneurs moved in, revolutionizing former fragmented state-owned or cooperative farms. Ample supplies of natural gas made Russia the largest exporter of fertilizer in the world. 

“Rich, flat, stone-free and irrigated soils on the Russia-Ukraine borders became the breadbasket of the world,” highlights Appleby. “Ukraine was producing 10% of the world’s wheat. Today, Russia and Ukraine are respectively the first and fifth largest exporters of wheat, representing 33% of all exports.”

The world’s agri-food stakeholders began closely watching the Black Sea region since the early onset of Russia’s invasion of Ukraine and will be continuing to closely monitor the situation.

By Benjamin Ferrer