War in Ukraine pushes up commodity prices

25 Mar 2022

Russia's invasion of Ukraine, a leading producer of many staple commodities such as wheat and sunflower oil, has put an abrupt stop to global exports and sent prices skyrocketing.

Ukraine alone is responsible for 14% of global corn exports, 15% of barley exports, 51% of sunflower-based vegetable exports and 14% of rapeseed oil exports.

In early March, the Food and Agricultural Organisation (FAO) of the United Nations warned that the conflict would result in international food and feed prices rising by up to 20%.

War in Ukraine pushes up commodity prices

This additional jump in price will be a shock for consumers worldwide. Even prior to Russia’s invasion, the cost of food was on the rise. The FAO found food prices in February 2022 were 20.7% higher than a year prior due to transportation cost increases, supply chain disruptions and disrupted harvests in Germany, Canada and South America.

The Economist conducted an analysis of the percentage of income spent on food, comparing 2017 and the forecasts for 2023, and found that Sub-Saharan Africa, South Asia, Latin America and the Middle East will experience the largest jumps in the share of income spent on food.

Major food commodities are affected

Since the Russian invasion of Ukraine on 24 Febuary, the price of wheat has risen an additional 30%, according to The Economist. This came on top of a 49% average price increase recorded from 2017 to 2021.

Corn, barley, sunflower oil and rapeseed oil are also experiencing shortages and high prices. However, the high cost of wheat in particular will acutely affect the Middle East and Africa. These two regions import the majority of their wheat from Ukraine, which is the fifth-largest wheat exporter globally and is responsible for 9% of global exports.

According to data from Mintec sent to Ingredients Network, 49% of Ukraine’s wheat crops come from areas that are currently occupied by Russian troops. If Ukraine is unable to export its wheat due to blockages at Black Sea ports and the increased cost of fuel to run the equipment limits harvesting, this could cause food shortages.

Increasing food costs could also cause social unrest and political instability. In the past, food riots broke out in Egypt, Mexico and Pakistan when consumers in urban areas were unable to access food at affordable prices.

Concern for future crops 

Future crops present another concern. The planting season begins in April for Ukraine’s major export crops. However, as large areas of what is known as 'Europe’s breadbasket' are currently occupied by Russian troops, there is uncertainty about whether crops will be planted on time. Similarly, a large proportion of the country’s workforce has either fled or is fighting, leaving an insufficient number of labourers in farming regions, according to Mintec.

 

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