Reconsidering land use: The impact of the war in Ukraine

The war in Ukraine has come at a time when global supply chains were starting to recover from the impact of the pandemic. Other pressures, such as the developing interest in land for carbon offsets and natural capital, are also affecting land value and land use.

During this European WBEF webinar we discussed the development of land use in the EU over the last half century. We also discussed how recent events would impact the use of land for agriculture and other purposes, the various pressures on land use, and the impact of these pressures on land value and prices.

Impacts on Europe

Russia’s invasion of Ukraine has evoked a lot of discussions and action around energy supply. Discussion has revolved around accelerating efforts towards a sustainable energy transition and becoming less dependent on oil and gas in the long term, and from Russia in the shorter term.

A second important aspect in our lives where the war has an impact is our food supply. After all, next to needing fuel for our buildings and cars, we also need fuel for our bodies.

As EU Agriculture Commissioner Janusz Wojciechowski recently explained, ‘Agriculture has become a crucial security policy’. The Ukraine and Russia have been described as the ‘the grain sheds of the world’, accounting for over 25% of the world’s global wheat exports. Certain food types are becoming scarcer and food in general is becoming more expensive. The war has undoubtedly had an impact on this. Land being a finite resource, the EU may need to re-think its land use policy, otherwise globalisation, as we’ve known it, could come to a (temporary) halt.

European food supplies and use

Roberto Bandieri MRICS, agronomist at RURALSET, shared some insights into our food supplies and use. Food is produced to meet three societal needs: feeding humans, feeding animals and for biofuel production. Every European country has import and export activities related to food. Demand and supply for different food products changes over time, as countries evolve and cope with changing preferences and social, political and ecological circumstances. Some European countries, such as Italy, are pretty much self-sufficient when it comes to food production for human consumption. The biggest direct impact of the war is on feeding animals as well as supply of fertilisers.

Florence Buchholzer is adviser at Foresight and Impact Assessment at the Strategy and Policy Analysis department of DG AGRI at the European Commission. She provided an overview of how the EU ensured Europe’s food supply, from the Treaty of Rome in 1957 to decades of Common Agricultural Policy (CAP). From post-World War shortages to an oversupply for certain commodities in the eighties, the EU is now a net-exporter. It is self-sufficient for most basic agricultural commodities, with oil seeds being one of the main exceptions. While food supply is not an issue, the war did come on top of inflationary pressures, which are causing challenges around food affordability and a deterioration in food security.

Food security, carbon offsets and land value

James Kavanagh MRICS, global land director at RICS, reiterated that food security is as important as energy security. The issues to do with food supply and transfer of imports from the Ukraine are being felt on the high street. For example, in the UK, there are many supermarkets rationing sunflower oil. According to Land Matrix, the top international investors in land in Ukraine before the war were the United States, followed by the UK, France and Sweden. Ukraine has traditionally been a breadbasket for a lot of the world, for agricultural commodities such as wheat. Land values are rising in the UK - by over 8% over the last year, and the same trends are true of other parts of Europe. Rather that reflecting the agricultural potential of the land, this rise reflects the growing potential to generate value through natural capital. Many investors are looking at land with an eye towards carbon trading.

The discussion also touched upon the different pressures of land use, especially the conflicting pressures of ensuring (affordable) food supply and addressing the environmental and climate challenges we continue to face. EU policies, such as the recently published ‘Farm to Fork Strategy’, will need to ensure that we not only continue to secure food supply, but that it is done in a fair and transparent way.

Listen to the recording of the full discussion and get in touch with us if you would like to share your views.