Just days after Russia pulled out of a deal that guaranteed safe passage for ships carrying cereal through the Black Sea, wheat prices have been rising on international markets, reigniting concerns about the impact on poorer, grain-importing countries as well as on western countries dealing with persistently high inflation.
After the Kremlin decided to end the UN-mediated Black Sea grain effort between Russia and Ukraine, Russia launched significant airstrikes against grain storage facilities in Ukraine as well as port infrastructure in the coastal city of Odesa.
The agreement, in force for just under a year, had reduced grain prices by more than a third (35%) in an effort to ease a food crisis brought on by Russia’s blockade of Ukrainian ports, which had impeded the transportation of millions of tonnes of essential commodities.
On Thursday morning, the price of wheat was about 1.5% higher on the Chicago Board of Trade exchange, and so were the prices of corn and soy beans. It came after wheat prices rose by more than 8% on Wednesday.
Other agricultural products’ prices, such those for sugar and rapeseed, have also been rising globally.
Ukraine is a significant producer of grains and oilseeds and was formerly the fifth-largest exporter of wheat in the world. Russia is a significant exporter of wheat.
Moscow has issued a warning that it will treat as potential military targets any ships traveling via the Black Sea to Ukrainian ports.
The head of foreign policy for the European Union accused Russia on Thursday of inciting a crisis in the world’s food supply.
Before an EU foreign ministers meeting, Josep Borrell stated, “What we already know is that this is going to create a big and huge food crisis in the world.”
António Guterres, the UN secretary general, has previously issued a warning that the result would be that hundreds of millions of people would go hungry.
Prior to the suspension of the grain agreement, wheat prices had decreased by roughly 14% since January, while corn prices had decreased by more than 20%.
Concerns about a possible increase in the price of necessary ingredients have arisen due to the recent rise in commodity futures, which comes as food inflation in the UK and other western nations has begun to decline.
“Although its highly disappointing for western shoppers, dealing with price increases at the tills, [Russia’s] move is treacherous for countries grappling with severe drought, particularly in the horn of Africa, where millions of people are at risk of acute food insecurity and famine,” said Susannah Streeter, head of money and markets at the broker Hargreaves Lansdown.
Analysts have also noted how other significant growth areas, including the US, have been impacted by exceptionally warm temperatures and a lack of precipitation. Forecasts for the US wheat harvest have been revised downward as a result, and inventories are expected to reach a 16-year low.
According to Streeter, “this highly unwelcome confluence of factors” has increased the price of US wheat futures by more than 13% since Tuesday, raising worries that food prices will continue to be extremely sticky.
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