The Russia-Ukraine war, high energy price threatens Bangladesh’s food security

A combination of extraordinary crises triggered by excessive energy prices, the Russia-Ukraine war, and back-to-back natural disasters have hit Bangladesh more than what meets the eye.

Emran Hossain

Before long, the crisis could spiral into a full-scale food crisis, articles published in local and international newspapers and magazines warned, referencing a similar experience, eventually leading to food riots and political instability.

Agriculturists interpreted the sustained high price of essential food items, including the staple rice, as a vital sign of a food crisis brewing amid the Covid pandemic that severely cut the purchasing capacity of the poor, especially in countries like Bangladesh.

‘Many countries are stocking up on foods. Bangladesh needs to build a good stock of food as well. Food scarcity can hit a rapidly polarising world, and money may not be of much use in such a crisis,’ said Tofazzal Islam, a professor at Bangabandhu Sheikh Mujibur Rahman Agricultural University.

The race to recover economic losses caused by the Covid pandemic amid the world polarising over the Russia-Ukraine war has exposed Bangladesh’s economy to many challenges.

The costs of energy, food, and agricultural inputs have multiplied since late 2020 in the international market and are still on the rising trend. The import costs of food, energy, and agricultural inputs go up as Bangladesh faces the risk of losing its readymade garment and manpower market globally due to the Russia-Ukraine crisis. These sectors account for over 80 percent of Bangladesh’s export income.

Photo Credit: Vidura Jang Bahadur / UN Women Asia and the Pacific

‘Bangladesh must carefully review the overall situation to slow down a bit its development activities,’ said economist Abdul Bayes.

Saving resources could be critical in tackling so many problems Bangladesh has on its hand, especially the potential food crisis, he added.

Bangladesh announced it would have to quadruple its agricultural subsidy in the current fiscal year to cover the increased import cost of agricultural inputs compared to the previous one.

The price of urea and non-urea fertilizers jumped three to six times between Januaries of 2021 and 2022. The potential of the agrochemicals gets even dearer if the Russia-Ukraine war lingered.

International media already reported on developed countries’ concerns, especially the USA and Canada, over their farmers cutting back on production because of excessive fertilizer prices. Some farmers switched to less fertilizer-intensive crops. Urea, accounting for half of Bangladesh’s fertilizer use, is produced from natural gas, the price of which increased manifolds since 2019. The price of other fertilizers went up as well after the rise in their production cost, owing to energy price.

Russia and its ally Belarus accounted for half of Bangladesh’s import of potassic fertilizer or MOP, the third most used agrochemical in the country. The last time Belarus exported MOP to Bangladesh was in November last year but failed to get paid because of a US sanction, officials at the Bangladesh Agricultural Development Corporation said.

Russia has not yet said anything about a disruption in fertilizer supply, the BADC officials said, but the US sanction affecting swift transactions with Russia may affect Bangladesh’s fertilizer import.

‘Fertiliser import is going to be disrupted anyway. Bangladesh needs to find new fertilizer sources,’ a BADC official said, requesting anonymity.

The BADC said that they have in stock fertilizers needed for growing crops until October and is firmly optimistic about the Russia-Ukraine war ending by then. Even if the war ended in line with hope, it could be long before normalcy returned to life in countries warring or are politically volatile.

For instance, political instability in Tunisia used to be a key TSP exporter to Bangladesh, accounting for a third of the country’s TSP import, hampered Bangladesh’s TSP import for over a decade now, BADC officials said.

Bangladesh has become dependent on a single source – Morocco – for TSP.

The import of DAP, the second most used fertilizer in the country, on the other hand, has been significantly hampered by China, a major global DAP producer, by the Covid-19 pandemic since last year.

Globally fertilizers are expected to remain costlier, if not scarcer, in the foreseeable future because of high energy prices and global political unrest, agriculturists said.

Natural gas is the raw material for urea fertilizer, which accounts for half of Bangladesh’s annual fertilizer consumption of 50 lakh tonnes. According to Reuters, the LNG spotmarket price increased nearly 10 times between October 2019 and March 2022. The high LNG price in the spot market prompted Bangladesh’s long-time suppliers to announce a cut on their supplies to Bangladesh this year. Things got even more complicated when one of the country’s two floating storage regasification units got its mooring line torn, disrupting import for about three months.

In November last year, the price of fuel used for agricultural irrigation has been increased by nearly a quarter.

In a clear reflection of growing frustration among farmers, two farmers from poverty-stricken northern Bangladesh recently committed suicide after failing to irrigate rice fields.

Farmers in Bangladesh, primarily small farm holders operating on high-interest loans, lost interest in growing the staple rice. An International Food Policy Research Institute study revealed that farmers lost from cultivating rice years ago.

Bangladesh’s farmers are also prone to crop losses from frequent natural disasters such as flooding and cyclonic storm.

A fall in local crop production could bear disastrous consequences, especially amidst the Russia-Ukraine crisis.

The world’s largest wheat importer Egypt is busy seeking other import sources after major global wheat producers such as Russia and Ukraine were locked in the war in late February.

In its latest World Agriculture Supply and Demand Estimates report released in April, the US Department of Agriculture (USDA) predicted a fall of 3 million tonnes in the global wheat trade.

Ukraine and Russia accounted for 42 percent of Bangladesh’s wheat import in 2020-21, according to the USDA report. Bangladesh produces only one million tonnes of wheat against the demand of seven million tonnes. Heat stress and wheat blast disease are reducing Bangladesh’s wheat production.

Livestock farming greatly depends on wheat for feed supply. The demand for wheat is also increasing in Bangladesh thanks to the change in people’s food habits due to economic progress.

The price per bushel of wheat in the international market increased to nearly $1100 in May from $800 in mid-February, according to the website Trading Economics.

‘We don’t know where the world is heading with the Russia-Ukraine war, but we could see countries are building food stock,’ said professor Tofazzal Islam of Bangabandhu Sheikh Mujibur Rahman Agricultural University. ‘We must focus on keeping agricultural production uninterrupted,’ he said.

In its latest report released in April, the USDA said that Bangladesh may need to import over one crore tonnes of rice, wheat, and corn in 2021-22.

These crises put the incumbent government in a very delicate situation ahead of the next general election due at the end of next year or early 2024, said agricultural economist Abdul Bayes.

Unless dealt with care, the government can get in trouble, just like in Sri Lanka and Pakistan, economists and political analysts warned.

The central bank data already confirmed a 50 percent increase in import expenses this fiscal year, compared with the previous fiscal year, while foreign remittance flow dropped by more than 17 percent.

The export market, on the other, is shrinking. Before the war broke out, Bangladesh’s export to Russia and Ukraine was worth $1 billion.

Still, Bangladesh seemed undeterred in pursuing high GDP growth and is planning to spend a third of its national budget, equivalent to the budget deficit, after an annual development programme. The increasing power sector expense is weighing down Bangladesh’s economy. While the international energy market remained high and volatile, Bangladesh’s capacity payment to idle power plants has been estimated to double to over Tk 26,000 crore next fiscal year, compared with the outgoing one. A 58 percent in power price hike was already recommended by a government technical committee five days ago, about two months after the same committee recommended a 20 percent increase in gas price.

Power policy experts warned that power price hikes might keep recurring in Bangladesh in the coming years, potentially leading to public unrest and political instability.

Continue Reading

LNG reliance drags down Bangladesh’s economy

The result is obvious for Bangladesh's energy sector – getting locked in expensive fossil fuels for a long time while renewable energy becomes even more viable and cheaper.

Bangladesh `should prioritize renewable energy’ as US halts approval for major LNG project

Bangladesh's LNG aspirations may face backlash as the White House pauses a decision on whether to approve what would be the largest natural gas export terminal in the United States.