The consequences of Vladimir Putin’s war against Ukraine are being felt everywhere.
An example is how consumers have to pay more to heat their homes and drive a car due to rising oil and gas prices.
In developed countries such as the US and the UK, this is quite painful.
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However, many other developing countries are facing an even bigger crisis: food shortages.
As you know, before the war, Russia and Ukraine accounted for 30% of world wheat exports..
The price of wheat skyrocketed immediately after Russia attacked its neighbor. The price of a bushel of wheat, which makes enough flour to bake 70 loaves of white bread or 90 loaves of wholemeal bread, fell from $8.84 on the day of the invasion to just under $13.64 on March 8. It has since dropped to $11.58 this morning, but that still represents a rise of more than 25% and higher than it has been for the better part of a decade.
That would be bad enough for the big wheat importers.
To make matters worse, Ukraine is now struggling to get its wheat out of the country. Ukraine still has about 20 million tons of wheat and corn for export in the 2021-2022 season, which cannot be exported because Russia block the Black Sea ports and the Sea of Azov, as a result of which 100 foreign ships were stranded.
Nikolai Gorbachev, chairman of the Ukrainian Grain Association, said: “We are facing a potential loss of $6 billion. »
For comparison, Ukraine’s total grain exports last year amounted to $27 billion.
“The poorest will suffer the most”
The consequences for countries buying Ukrainian wheat are dire. These include Indonesia, Egypt – the world’s largest wheat importer – Pakistan, Tunisia and Morocco. Deprived of Ukrainian wheat, they will have to look for an alternative that will cost them more.
Those who will suffer the most will be the poorest in the world. The United Nations Food Programme, which feeds 125 million of the world’s hungriest people, gets about half of its grain from Ukraine.
David Beasley, chief executive of the WFP, said last week that the sharp rise in food prices and the fall in wheat exports after the war threatened to cause a global catastrophe.
He added: “This will affect millions and millions of people, especially in the poorest countries in the world.”
Some countries are already facing shortages. The Iraqi agriculture minister said on Tuesday that the country’s current stocks of wheat had fallen to less than three months of consumption. Egypt will have reserves equivalent to only four months of consumption. Lebanon, which depends on Ukraine for 70% of its wheat, will be especially vulnerable.
This issue will be of particular concern to Muslim countries, since they are only 10 days before Ramadan, the traditional period of increased food consumption. The global advisory network HLB estimates that bread consumption during Ramadan typically increases by 63%.
The crisis is also likely to be acute in many sub-Saharan African countries. About 18 African countries receive more than half of their wheat from Ukraine and Russia.
These deficits will exacerbate an already grim situation.
Food price inflation will worsen
The United Nations estimates food price inflation was 20.7% year-on-year in February due to record high prices for commodities such as vegetable oil, palm oil and soybeans.
But these numbers were compiled before the invasion, so you can expect them to get worse.
In countries such as the Democratic Republic of the Congo, where prices of staples such as sugar and vegetable oil have risen by a third in recent weeks, this is already happening.
There are many recent examples where high prices for wheat, flour and bread have led to social upheaval. In 2008, for example, Russian wheat production fell by a third due to drought, causing world wheat prices to rise by 50%, sparking hunger riots in 40 countries including Burkina Faso, Senegal, Bangladesh, Morocco, Mozambique and Pakistan, where the military was sent to stop the theft of food from fields and warehouses.
More recently, after declining wheat crops in Canada, Ukraine and Russia, wheat prices rose sharply in late 2010. The food riots in Tunisia turned into the “Arab Spring”, which led to the overthrow of governments in Tunisia, Libya, Egypt and an uprising in Syria. The effects of these events are still being felt in parts of North Africa and the Middle East.
Some large wheat and grain producers will respond to the crisis by shipping more. India, which is one of the largest wheat producers in the world but exports little due to its huge domestic demand, has increased its exports. Just like Australia and Canada. But the global market tends to be quite tight due to drought in many parts of the world, including Canada, preventing immediate relief.
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Those who can export, of course, will also try to make a profit. Argentina, which is struggling with high domestic inflation, imposed a 33 percent tax on soy and flour exports over the weekend to raise funds to subsidize the country’s wheat and flour prices.
Ukrainian farmers are already warning of fertilizer shortages just as they need to plant barley and corn.
Thus, there will be no immediate relief from this crisis, which is expected to drag on into next year.