Food inflation will worsen in Ukraine
(Bloomberg) — Food inflation is already plaguing global consumers, but now price increases could get even bigger as Russia’s attack on Ukraine threatens major shipments of some of the world’s staple crops .
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Ukraine and Russia together account for more than a quarter of world wheat trade, as well as a fifth of corn sales. Port and rail closures in Ukraine, dubbed the breadbasket of Europe, have already begun to throw the country’s commodity exports into chaos.
It’s not just threats to grain shipments that could fuel inflation. Russia is also a major low-cost exporter of almost all types of fertilizers. It’s hard to overstate the importance of fertilizers in the food supply chain – virtually every plate of food you touch got there with the help of fertilizers. If global trade is disrupted, it will mean higher costs for farmers around the world and, therefore, increased food inflation.
Prices are already skyrocketing, with everything from wheat to corn to soybeans up this week. A war that halts Ukrainian grain exports is likely to push wheat prices up another 30% and corn prices up 20%, Rabobank analysts say.
Wheat in Chicago hit its highest level in more than 13 years on Friday after gains were capped in the previous session when futures jumped from the maximum allowed by the exchange. Corn is up almost 20% so far this year.
“It’s going to push up inflation,” Andrew Harig, vice president of the Food Marketing Institute, said Thursday at the U.S. Department of Agriculture’s annual agricultural outlook forum. “We just don’t have a full understanding of how this process unfolds.”
Global food prices have already reached record highs in recent months. Extreme weather conditions have made it more difficult to grow crops, while a shortage of workers and higher shipping costs have hampered supply chains. The crisis in Ukraine will only push prices even higher, said Jack Scoville, vice president of Price Futures Group Inc. in Chicago.
“The sky’s the limit,” Scoville said.
(Updates with crop prices in fifth paragraph.)
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