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.
Russia and Ukraine together represent more than 25% of world wheat trade. 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 an exporter at a low cost of almost all types 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. Global trade disruptions will lead to higher prices for farmers around the world and more inflation.
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The prices of everything, from wheat to soybeans to corn and even corn, are already rising. Analysts at Rabobank believe that a conflict in Ukraine would cause wheat prices to rise by an additional 30% and corn by 20% respectively.
Chicago’s wheat prices surged after gains in futures were limited in Friday’s session. Futures rose to their maximum limit by the exchange, allowing Chicagoans to see the best quality wheat in over 13 years. This year, corn is up nearly 20%.
“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.”
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Over the past few months, global food prices have risen to new records. It has been difficult to cultivate crops due to extreme weather conditions. Supply chains have become strained by a lack of workers and high shipping costs. Jack Scoville from Price Futures Group Inc., Chicago said that the Ukraine crisis will push prices higher.
“The sky’s the limit,” Scoville said.