Stuff on 13th March published an article from the Economist headlined as above!
Russia and Ukraine, respectively the largest and fifth-largest wheat exporters, together account for 29 per cent of international annual sales.
And after several poor harvests, frantic buying during the pandemic and supply-chain issues since, global stocks are 31 per cent below the five-year average.
Currently it is the threat of embargoes from the West that is pushing prices through the roof.
Wheat prices, which were already 49 per cent above their 2017-21 average in mid-February, have risen by another 30 per cent since the invasion of Ukraine started on February 24th.
Rabobank, a Dutch lender, has stated that they believe that wheat prices could climb by another third.
But the damage to global food supply will extend far beyond just the grain–and last longer than the war itself. Together Russia and Ukraine export 12 per cent of the calories traded worldwide. They rank among the top five exporters of many oilseeds and cereals, from barley and corn to sunflowers, consumed by humans and animals.
In February, even before the war started, a food-price index compiled by the UN Food and Agriculture Organisation had reached an all-time high; the number of people deemed food-insecure, at 800million, was at its highest for a decade.
In normal time’s wheat and barley crops are harvested in the summer and exported in the autumn but these are not normal times: with global stocks low, big importers of Black Sea wheat, chiefly in the Middle East and North Africa, are anxious to secure more supplies and they are not getting them as the Ukrainian ports are shut.
Alternative sources are unaffordable. Last week Egypt cancelled its second wheat tender in a row after receiving only three offers, down from 20 a fortnight before.
Future crops are an even bigger worry. In Ukraine the war may result in lower yields and area planted. Winter crops such as wheat and barley, which are sown in October, could be smaller because of a lack of fertiliser and pesticides. Spring crops such as corn and sunflowers, the planting of which would normally start imminently, may not get sown at all.
In Russia the risk is not curtailed production but blockaded exports. Although food sales are not yet subject to sanctions, Western banks are reluctant to lend to traders. Fear of being fined by governments in the West or shamed by its press is keeping merchants at bay. While Ukraine is “unreachable”, Russia is “untouchable”, says Michael Magdovitz of Rabobank.
Most alarming will be the conflict’s impact on agriculture worldwide. The region is a big supplier of critical fertiliser components, including natural gas and potash. Fertiliser prices had already doubled or tripled, depending on the type, even before the war, owing to rising energy and transport costs and sanctions imposed in 2021 on Belarus, which produces 18 per cent of the world’s potash, as it cracked down on dissidents.
As Russia, which accounts for 20 per cent of global output, finds it harder to export its own potash, prices are sure to rise further. Since four-fifths of the world’s potash is traded internationally, the impact of price spikes will be felt in every agricultural region in the world.
As a result of all this, a much greater share of incomes will soon be spent on food. This will be felt most acutely in the Middle East, Africa and parts of Asia, where some 800m people depend heavily on Black Sea wheat. That includes Turkey, which supplies much of the southern Mediterranean with flour. Egypt usually buys 70 per cent of its wheat from Russia and Ukraine. The latter alone accounts for half of Lebanon’s wheat imports. Many others can hardly do without Ukraine’s corn, soya beans and vegetable oil.
Meanwhile, higher fertiliser and energy costs will crimp farmers’ margins everywhere and eventually those costs will be passed on to the consumer.
There is no easy fix. The war in Ukraine is already a tragedy. As it ravages the world’s breadbasket, a calamity looms.
As well as the human suffering caused by Russia’s attack on Ukraine, the war is causing global economic impacts, some of which are already being felt in New Zealand.
Russia and Ukraine are minor trading partners for New Zealand, with Russia accounting for just 0.4 per cent of New Zealand’s good exports, and Ukraine an even smaller amount.
But Russia’s invasion two weeks ago sent some commodity prices surging, and raised fears of food shortages and further supply chain disruption, which matters for a small trading nation like New Zealand.
On the one hand rising commodity prices are good for New Zealand’s primary producers, but on the other, it means New Zealanders pay more at the petrol pump and face increased inflation.
New Zealand’s biggest exposure to the war in Ukraine was largely through price channels.
Commodity prices have been rising steadily over the past year, as rising global demand struggled against Covid-19 disruption, they said.
“But with the outbreak of war and implementation of sanctions against Russia, those increases have turned vertical,” they said.
As a small open economy, New Zealand was exposed to global fluctuations in commodity prices, they said.
The most obvious impact for many New Zealanders was through petrol prices, they said.
Oil prices hit fresh 14-year highs after the United States and United Kingdom announced bans on imports of Russian oil.
The diesel price in New Zealand has risen by 183% from January 2021 to January 2022 and although the fuel prices have a weighting of less than 5 per cent in the consumer price index, they are still likely to add significantly to inflation over the first half of the year, given the sheer size of the movement in oil prices taking place.
Even excluding the impact of oil, commodity prices could still have a “significant and persistent” impact on inflation in New Zealand, they said.
Inflation expectations were already worryingly high, and domestic inflation had shown no signs of slowing and some forecasts have inflation peaking at 7.4 per cent in the second quarter of the year.
Financial markets were already pricing in the risk of grains being in short supply, and the increased cost of feeding grain to livestock would restrict the global supply of beef, pork and milk and increase prices, she said.
New Zealand farmers were not directly impacted due to stock being primarily pasture-fed, but the steeply rising commodity prices posed a significant risk to inflation and at a time when the global environment had already been highly inflationary.
The benchmark international price of oil pushed through US$120 (NZ$176) a barrel for the first time since 2008 and rising oil prices acted like a tax on New Zealand spenders both at the pump and on everyday living costs, he said.
Even given all of the above it seems that our hard-left government is still apparently intent on destroying the productivity of our agricultural sectors with more rules and regulations that are not fit for purpose and which will only take away some of the security from our ability to produce food.