For the global food market, there are few worse countries to be in conflict than Russia and Ukraine. Over the past five years, together they have accounted for a significant portion of the world’s wheat, corn, 32% barley (a crucial source of animal feed) and sunflower seed oil.
Ukrainian farms are about to miss critical planting and harvesting seasons. European fertilizer plants are significantly cutting production because of high energy prices. Farmers from Brazil to Texas are cutting back on fertilizer, threatening the size of the next harvests. And China, facing its worst wheat crop in decades after severe flooding, is planning to buy much more of the world’s dwindling supply.
The result is that global food and fertilizer prices are soaring. Since the invasion last month, wheat prices have increased by 21 percent, barley by 33 percent and some fertilizers by 40 percent!
This is compounded by situations that were already raising prices and squeezing supplies: the pandemic, shipping constraints, high energy costs and recent droughts, floods and fires.
Around the world, the result will be even higher grocery bills. In February, U.S. grocery prices were already up 8.6 percent over a year prior, the largest increase in 40 years. Economists expect the war to further inflate those prices.
Apocryphal or not, that is what Marie Antoinette is thought to have said when told that the French peasants had no bread. And we know what happened to her. What actually leads to people go into the streets in protest? It starts from food shortages and food price inflation.
According to the UN Food Prices Index, food commodity prices were already at 10-year highs because of global harvest issues, and that was before the war in Ukraine. Now they are at their highest since records began 60 years ago!
That has fueled a cost-of-living crisis that is worrying politicians and has sparked warnings of social unrest across the world.
The budgets and economies of many African and Arab countries are buckling under the cost of food. Tunisia struggled to pay for some food imports before the war and now is trying to prevent an economic collapse. Inflation has already set off protests in Morocco and is stirring unrest and violent crackdowns in Sudan.
While the United States and its allies are trying to find ways to redistribute production, it’s impossible to produce millions of tons of additional wheat.