Ukraine’s invasion threatens global wheat supply

Russia’s invasion of Ukraine is threatening to cut off some international wheat shipments, trigger shortages and push prices of a key crop higher as supply chain disruptions have occurred. cost of food sent out.

Together Russia and Ukraine produce nearly a quarter of the world’s wheat, supplying billions of people in the form of bread, pasta and packaged food. These countries are also major suppliers of barley, sunflower seed oil and corn, among other products. Wheat futures on the Chicago Board of Trade were up more than 5% early Thursday afternoon, while corn futures were up more than 2%.

In recent days, prices of agricultural products have fluctuating strongly as tensions around the Black Sea threaten to disrupt global shipments of wheat, corn and vegetable oils. Disruptions and rising prices – as well as the cost of fuel and fertilizer, important inputs for farmers – could continue to weigh on global food markets, analysts say demand and threaten social stability.

Food prices are available has increased globally as a result of pandemic-related transportation disruptions, increased costs for farmers, and adverse weather, and wheat is no exception. From April 2020 to December 2021, the price of wheat increased by 80%, according to data from the International Monetary Fund. This is on par with the increase in costs for corn and higher than for soybeans or coffee.

An atmosphere of uncertainty enveloped global markets on Thursday, as Russia’s invasion of Ukraine by land, air and sea unfolded. S&P Global Platts has suspended publishing transactions, offers and other market values ​​for cargo loading or delivering in the Black Sea.

The conflict has shut down cargo ships and prompted airlines to cancel flights, further reducing capacity for companies trying to move cargo around the world.

According to Lloyd’s List Intelligence, a maritime information service, cargo operations to the Sea of ​​Azov, off Ukraine’s southeast coast, appeared to have been shut down as the conflict unfolded on Thursday morning, with Dozens of boats are lined up at the entrance to the Black Sea.

Russia, the world’s largest wheat exporter, restricted its own wheat shipments last year with an export tax designed to lower food prices in the country. Further restrictions could raise concerns about social unrest in other countries, particularly in Turkey, Egypt, Kazakhstan and other parts of Europe that import wheat.

And since the market for agricultural commodities is global, any reduction in wheat supply could push up the demand and price of wheat grown in other parts of the world, including Australia, Argentina and the Midwest China. Ky.

The outcome depends in part on whether countries decide to announce sanctions on Russian food, or whether Russia responds with further limits on its exports or sanctions. retaliatory penalties for foreign goods.

It remains to be seen whether other countries will enact limits on agricultural trade. But White House officials said their efforts to punish Russian leaders, military and industrial production, not the Russian people. They are preparing another package of sanctions and export controls to cut off Russia’s access to advanced technologysuch as semiconductors and aircraft parts.

Analysts at Rabobank said in a note last Friday that two-thirds of Russia’s wheat and barley for the crop was exported, but should the sanctions end, remove the remainder of the crop. crops from overseas markets could send global prices up for almost a third day.

The impact on global cereal prices will partly depend on what China decides to do, analysts say. China imports large amounts of maize, barley and sorghum for animal feed from world markets. It could choose to buy those commodities, as well as wheat, from Russia instead of other countries. In such a situation, the impact of sanctions on the global grain market would be relatively small, they said.

On Thursday, China began approving Russian wheat imports that have long been blocked because of Beijing’s concerns about fungi and other contaminants. The countries announced that China will start importing wheat and barley from Russia on February 8, shortly after Russian President Vladimir V. Putin visited China ahead of the Beijing Olympics.

China has emerged as one of Russia’s strongest potential trading partners in the event of further Western sanctions. Chinese leaders have refused to condemn Russia’s invasion of Ukraine, although they have also called for respect for national sovereignty. Ukraine’s invasion threatens global wheat supply

Fry Electronics Team

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