Invasion Of Wheat-Producing Ukraine To Push Food Prices Higher

The cost of a Russian invasion of Ukraine — one of the world’s largest grain exporters — could ripple across the globe, driving up surging food prices and increasing the risk of social unrest beyond Eastern Europe, Anthony Faiola, and Sammy Westfall wrote for Washington Post.

Photo Insert: Ukraine is the world’s fourth-largest supplier of wheat and corn.

As tensions mount, one focus of economic concern is the global impact of extreme Western sanctions on Russia — a major exporter of agricultural goods, metals, and fuel, particularly to Western Europe and China.

Should the crisis escalate to the point of triggering staggering sanctions, the blow could spike prices and worsen global supply chain woes by tightening markets for commodities, including natural gas and metals such as nickel, copper, and platinum used in manufacturing everything from cars to spacecraft.

Yet perhaps just as crucially, a major Russian incursion would also affect the flow of goods from Ukraine, the world’s fourth-largest supplier of wheat and corn.

A major disruption of Ukrainian exports — especially in conjunction with any interruption in even larger Russian grain exports — could pile onto a global inflationary cycle that in many countries is already the worst in decades.

Alex Smith, a food and agriculture analyst at the Breakthrough Institute, writes in Foreign Policy that threats to Ukraine’s wheat exports pose the greatest risk to global food security. Its customers include China and the European Union (EU), “but the developing world is where Ukrainian wheat has become an essential import,” he wrote.

In 2020, half of all wheat consumed in Lebanon came from Ukraine. Yemen and Libya respectively import 22 percent and 43 percent of their total wheat consumption from Ukraine. In 2020, Ukraine also supplied more than 20 percent of wheat consumption in Malaysia, Indonesia, and Bangladesh.

Last year, global food prices surged 28.1 percent to their highest level in a decade, according to the United Nation’s food agency. Worries of war have already driven US corn futures to their highest levels since June and sent wheat futures to two-month highs before a recent easing.

Over the past 20 years, bountiful Ukrainian harvests boosted the country’s role as a global breadbasket. Andrey Sizov, head of Russia-based consultancy SovEcon, said this week that he still sees the risk of a Russian invasion as low.

But should one happen, and exports are deeply disrupted, “that would mean big problems for all large food importers, especially in northern Africa, Iran, Sudan, Afghanistan, and Egypt. … The risk in all those countries of social unrest increases under this scenario.”

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