Food insecurity has emerged as a significant source of systemic risk for global financial markets, Sara Menker, founder and CEO of Gro Intelligence, told the 蜜豆视频 Sustainable Finance conference. 鈥淚f you look at the global food prices, they've been rising very rapidly since the peak of the COVID crisis,鈥� she noted, and the Ukraine-Russian conflict has severely compounded the problem.

Menker noted that rising food insecurity is creating political pressures and economic disruption in some countries. 鈥淭hat has real ramifications for financial markets,鈥� she said in a conversation with Virat Agarwal, Head of Commodities Structuring, 蜜豆视频 Investment Bank. 鈥淭he ability for countries to service debt has ramifications for financial markets. And a lot of that pressure right now in emerging economies is coming from food prices. I cannot emphasize enough what a true systemic risk it is.鈥�

This impact of higher food prices and disruption in global supply patterns are also affecting corporate issuers as well. The food-supply and commodity-cost headaches of companies 鈥渜uickly become headaches for their investors,鈥� Menker noted.

The Russian-Ukraine conflict has underscored how critical that region had become to global food supplies, she said. Current challenges reflect major logistics bottlenecks, and destruction of fields, equipment, lower acreage plantings in Ukraine, along with trade sanctions on Russia.

鈥淲hen you think of grain markets going forward, you basically need a perfect season in the U.S. summer to fill that gap,鈥� Menker said. 鈥淚t's still too early to tell, but the weather hasn't been as friendly as we were hoping it would be.鈥�

Vegetable oil prices are a particular problem. Prices continue to rise as a huge amount of corn, palm oil and sugar crops are used to meet growing biofuel demand. 鈥淓ssentially the vegetable oil crisis is really now a biofuels problem,鈥� Menker said.

Contributing to the price increases are significant climate shocks, including two consecutive drought seasons in Brazil. Producer countries鈥� protectionist measures deepen the problem by limiting exports, which pushes up global prices and makes vegetable oil still less affordable.

Fertilizer poses another major challenge. She noted that nitrogen fertilizer production depends on natural gas supplies, which are restricted now in Europe by the reduction of Russian gas imports. Potash and phosphate mining and production are concentrated in a handful of countries. These include Belarus and Russia, where exports are limited by sanctions.

About 70% of phosphate-based fertilizer comes from Morocco, she noted. Nitrogen is required to process phosphate, and Morocco can no longer obtain sufficient supplies of nitrogen from Russia. The result is a 鈥渇ertilizer crisis鈥� that has seen prices triple. 鈥淭he bigger sort of question around the fertilizer situation is going to be what it does to yields next year, not this year,鈥� Menker cautioned.

Taking a longer view, she noted that innovations that make seeds more resilient in the face of climate change will be important in the years ahead for addressing food insecurity. But the research-and-development cycles for such improvements are lengthy, Menker noted.聽