Russia’s invasion of Ukraine threatens to increase food prices. The ongoing warfare is already taking a toll on wheat prices, increasing Chicago benchmark prices by 40% only 10 days into the conflict due to disrupted trade.
Ukraine and Russia are the world’s breadbasket nations, responsible for almost a third (29%) of global wheat and 75% of global sunflower oil exports. Furthermore, Ukraine alone accounts for 15% of the global corn exports.
If the conflict goes on, it threatens to slow down, even halt Ukrainian crop production. Additionally, there’s a possibility that Russia will enforce an embargo on grain exports, further reducing grain supplies and contributing to global wheat inflation.
Developing countries will probably take the biggest hit from this disruption (e.g., countries like Egypt that produce barely enough grain to meet half the domestic demand).
This might make other countries, like the US, start exporting wheat to remedy the situation, which might, in turn, further increase domestic prices.
The whole situation will inevitably contribute to the increased prices of bread, animal feed, beer, meat, etc.
Plus, let’s not forget the higher prices in oil and gas, which significantly affect the cost of grain production. Given that the rising energy prices are also the leading factors of inflation, the hopes for the end of this situation fade with every failed negotiation between the two sides.
Given the high transportation prices and supply chain disruptions, it’s just a matter of time before we experience a surge of price in every food-related service, from restaurants to meal delivery services.
It’s certain that the global food inflation will follow the extent of the conflict escalation. And while specialists are evaluating different scenarios, at present, anything is possible.