Putin’s war against Ukraine won’t just affect current prices, but prices in the near and possibly distant future. The probability of Ukraine being able to plant and harvest the crops in 2022 needed to meet demand, has been severely hindered. Countries in Northern and Central Africa, as well as Asia rely heavily on exports from the embattled country and region.
Consequences will ripple through Europe first, then through the world’s food supply chain.
The world opened up after Covid. Prices went up around the globe. Coupled with draught, due to the climate crisis, the US has been forced to look to outside sources for wheat.
From gasoline to groceries, US customers have felt the pinch of rising costs. And thanks to Russia’s invasion of Ukraine, that isn’t likely to change anytime soon. Ukraine and Russia are top exporters of major grains and vegetable oils. The two countries supply the majority of the world’s sunflower seeds. Russia, the world’s wheat.
In addition, Russia provides the majority of natural gas to the world.
Because natural gas prices are also expected to increase, this will affect the price of fertilizer. That will trickle down to farms, farmers, crops, feed, animals. Not to mention Putin’s war will have lasting financial implications of sanctions, embargoes, and boycotts.
It’s easy for US consumers to think that a war, half a world away, won’t have an impact on domestic prices. Well, think again. According to VOX:
On February 24th, when Russia invaded Ukraine, Chicago wheat futures spiked to their highest level since the beginning of the year.
Prices have since leveled, but it’s a reminder of the immediate impact the actions of one nation can have on the rest of the world.
Wheat is a grain. And a staple. It’s the building block in everyday foods that sustain populations. The impact to the price of corn, Ukraine is the world’s fourth largest producer, and oats will also be negatively felt. Prices will rise across the board. Robb MacKie, President of the American Bakers Association had this to say:
In a situation where the whole supply chain is already stressed, if the conflict goes on more than a couple weeks, you will start to see an impact in food prices.
Already suffering from supply chain disruptions and inconsistencies, the US will be at a disadvantage as the price of commodities keeps rising. Let’s not forget that thanks to the failed trade war with China, the domestic soybean market was devastated. Putting many US soy farmers out of business for good.
Black Sea port access has already been interrupted. While Europe will feel the affects first, the US won’t be far behind.
Though it has been less than a week since Russia invaded Ukraine, at this point it doesn’t matter if Putin’s war lasts days, weeks, or months. The damage is done.
Original source: Washington Post
Follow Ty Ross on Twitter @cooltxchick.