Wheat prices have hit record highs due to growing fears of supply shortages due to the war in Ukraine, raising the specter of rising global food inflation.
Ukraine and Russia account for about 30 percent of world wheat trade and still have last year’s harvest. “There is no end in sight to the rise because 30% of the world’s wheat exports have been cut off from the world market,” said Carsten Fritsch, an analyst at Commerzbank.
Wheat traded in Chicago, the international benchmark, has jumped more than 50 percent since Russia invaded Ukraine. Prices rose to $ 13.40 per bushel on Friday as European wheat mill in Paris reached a record 406 euros per tonne.
Food and agriculture experts have warned of growing food insecurity in poorer countries, many of which are already suffering from high levels of hunger due to the coronavirus pandemic. Food inflation is also expected to rise. In January, the world’s average food inflation reached 7.8 percent, the highest level in seven years, according to the IMF.
Large price increases have already limited the ability of grain-importing countries to buy wheat. Turkey, a leading buyer of Russian wheat, has been forced to cut its international auction volumes from its original targets.
Demand is also shifting to alternative cereals, Commerzbank said, which has led to a significant rise in corn over the past few days. Corn, traded in Chicago, has risen nearly 10 percent since the Russian invasion.
Russia’s war in Ukraine has destroyed world grain and energy markets, leading to higher food prices, with poorer food-importing countries experiencing the worst, said Caitlin Welsh of the Center for Strategic and International Studies. .
“Russia’s war against Ukraine has the potential to exacerbate food insecurity around the world,” she said.
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Grain exports have been suspended due to a lack of transport due to port closures, while paying Russia has become more complicated due to Western sanctions. Leading agricultural traders, including Archer Daniels Midland and Bunge, which buy and sell grain around the world, have closed operations in Ukraine.
Analysts and traders are concerned about planting this year’s spring crop, including wheat, corn and barley. Winter wheat planted in European autumn may not be harvested in summer.
In addition to grain prices, farmers around the world are likely to feel the impact of rising costs, as Russia and Belarus are the leading producers of fertilizers. Russia’s Ministry of Industry and Trade has recommended that fertilizer producers temporarily suspend exports, according to Interfax. “Both potash and phosphate are still far from record prices in 2008, but that record could be tested in the coming weeks,” said Chris Lawson, fertilizer manager at CRU.
Brazilian Agriculture Minister Teresa Cristina said this week that the country, which is the fourth largest consumer of fertilizers, has enough stocks until the start of the next harvest in October. She plans to visit Canada this month to negotiate more potash supplies. The South American nation imports about 80% of its fertilizers. Russia is the largest source, providing about a quarter.