Can Canada make up for a shortfall of grain from Ukraine?

Ukraine is the breadbasket of Europe in times of peace. Now that war has initiated the most significant global food security crises in generations, other breadbasket nations face opportunities and barriers in filling the void. 

But what could Canada’s role be? According to the latest report from the Canadian Agri-Food Policy Institute (CAPI), this country could indeed help alleviate depleting grain reserves worldwide.

There are many caveats, though. Infrastructure limitations, little production of key commodities, the needs of domestic farmers and ranchers, as well as generally low fluid global stocks, all limit what Canada can do.

Why it matters: While the global food crises might be manageable in the short term, the ability for Canada to fill much of the void left by the war requires significant investments in domestic resiliency. Even then, international cooperation will be essential. 

The CAPI report provided additional context for a previous presentation that analyzed the state of global food supply and demand, the role that Ukraine and Russia play in supplying food, livestock feed, and fertilizer around the world, insight into the role Canada can play while scarcity drives prices higher, as well as policy recommendations and considerations. 

Al Mussell, research director for CAPI and one of the report’s three authors, details the actions Canada could take in response to the war in Ukraine, despite having no grain reserves or land that can be put into immediate service. 

Increase domestic fertilizer capacity

Canada relies heavily on imported fertilizer for grain production, which is a pervasive supply problem. It’s also one particularly significant for Eastern Canada, where the need for Russian-made nitrogen is high. 

“Maybe the biggest point for Ontario in the immediate term is the extent to which Ontario and Eastern Canada is, or has been, quite highly dependent upon Russian sources of nitrogen fertilizers,” says Mussell. 

“Because many ag-exporting countries are deficit in nitrogen fertilizers and import from Russia, it has become a strategic commodity. Under existing hostilities, we will need a new plan for Eastern Canada.”

Improve rail, port and supply chain infrastructure

While in-field productivity is always in focus, Mussell emphasizes the ability to move product as a critical and currently lagging element in Canada’s food production system. 

“The case in Vancouver, when damage to one single bridge can really hobble your ability to move product, that’s a deep concern,” says Mussell. 

Looking at the war in Ukraine for what it is – a conflict with inevitable long-term consequences – is a vital consideration, he adds. Infrastructure resiliency must be developed with this in mind. 

“Open conflict [in Ukraine] is just the most recent manifestation of a devolving situation. What I think that should tell you is we’re not going to get to some point where these tensions disappear, or where we get some reconciliation and go back to normal. That’s not happening.”

Support transitioning industries

Domestic supplies of grain are themselves not necessarily in an ideal state. High prices and low supplies continue to strain many in the livestock sector, while market forces might make it difficult for grain growers to transition toward crops that are needed most. 

If oilseed prices go up along with wheat prices, for example, what incentives are there for the grower to produce the former, lower-paying commodity? Will wartime-level market policies be needed to promote wheat acreage? 

What will be required to grow the types of crops most needed by food-insecure countries, while ensuring Canada’s domestic industry has what it needs as well? 

As is the case with fertilizer, Canadians also need to ensure resiliency in processing. 

“The international trade environment facing Canada has become increasingly unkind of a number of years,” says Mussell, citing preferential trade agreements, other countries enacting domestic support, trade retaliation and other examples. 

“Another defence against an unfriendly trade environment is you have to look at processing product and adding value to it in Canada…It’s value creation and input replacement.”

Participate in multi-national relief efforts

The grain reserves in some countries are already in dire straits. Livestock-producing nations like Spain, for example, rely heavily on Ukrainian and Russian maize. With none being exported, existing feed stocks are expected to be exhausted by mid to late April.

“They have a catastrophe on their hands…I would be worried you have a real significant and maybe sharp decline of livestock product output in European countries. Perhaps shockingly so,” says Mussell. 

Regarding wheat and countries where the population relies on specific types of wheat for a significant portion of diet, Mussell’s review of current global stocks makes him believe some shorter-term crises can be avoided. The longer term is another story, however, and one made worse by the fact that a substantial portion of global grain stocks – more than 50 per cent of all wheat and 70 per cent of all corn – are held by China for domestic use. 

“What I think will happen in 2022 is, there are stocks that can be drawn on…the issue is going to be 2023, 2024, and so on. That’s a very complicated question.

“In the immediate term it’s going to be tough, there’s going to be some hungry people, but we will get through it. But this has a much longer runway than just 2022,” says Mussell. 

“Production of cereals globally is going up, and going up pretty impressively. The issue is it can’t keep up with global demand, and as a consequence the stocks are declining. 

“When you can’t build stocks what it means is your ability to feed people in a given year is dependent on that year’s harvest. I wouldn’t want to make it seem like you’re operating on a knife edge, but it is a little bit like that.”

Preventing civil strife

The icing on what is a rather unpleasant cake lies in another fact: conflict in one place tends to spur conflict elsewhere. When food supplies decline and hunger takes hold, violence is more likely. 

Mussell points to the “Arab Spring” revolts in Libya, Tunisia, Egypt, Lebanon and Syria as relatively recent examples of unrest that were spurred in part by high food costs. Canadians must consider this risk as they rethink their own food production system. 

“What a terrible irony it would be, if conflict in Ukraine indirectly induced a bunch of conflict throughout the Middle East. It’s not unthinkable,” Mussell says.

“We need to realize as a country that we have capacity that helps provide solutions to food security that very few other countries do. We’ve got food,” he says. “It’s crazy to think we could be looking at a future where food is a very highly sought-after element of security, and that’s certainly the case in the immediate term, and it could be the case in the long term as well.”