Food inflation is already plaguing global consumers, but now the price gains could get even sharper as Russia’s attack on Ukraine threatens key shipments of some of the world’s staple crops.
Ukraine and Russia together account for more than a quarter of the global trade in wheat, as well as a fifth of corn sales. Port and railway closures in Ukraine, nicknamed the breadbasket of Europe, have already started to throw the nation’s commodity exports into chaos.
It’s not just the threats to grain shipments that could drive inflation. Russia is also a major low-cost exporter of nearly every kind of fertilizer. It’s hard to overstate how important fertilizer is to the food supply chain—practically every plate of food you touch has gotten there with the help fertilizers. If global trade gets disrupted, it will mean higher costs for farmers across the globe, and in turn, more food inflation.
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Prices are already spiking, with everything from wheat to corn to soybeans surging this week. A war that would stop Ukrainian grain exports would likely drive wheat prices higher by another 30%, and corn by 20%, according to analysts at Rabobank.
Wheat in Chicago surged to the highest level in more than 13 years on Friday after gains were capped in the previous session when futures jumped by the maximum allowed by the exchange. Corn is up almost 20% so far this year.
“It is going to drive inflation up,” Andrew Harig, a vice president of the Food Marketing Institute, said at the U.S. Department of Agriculture’s annual Agriculture Outlook Forum on Thursday. “We just don’t have a total understanding of how that process plays out.”
Global food prices have already soared to records over the last few months. Extreme weather has made it harder to grow crops, while a shortage of workers and higher shipping costs snarled supply chains. The crisis in Ukraine will only push prices up further, said Jack Scoville, vice president of Price Futures Group Inc. in Chicago.
“The sky’s the limit,” Scoville said.
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