We have seen how Russia’s invasion of Ukraine – After the Covid virus supply cut – As a result, food prices rose to record levelsaccording to the Food and Agriculture Organization of the United Nations.
Supply gap from war could drive up global food and feed prices by as much as 22% Above their already high prices, the FAO said late last week.
Wheat prices led the increases, not least because Ukraine itself accounts for about one-eighth of global trade in the commodity, or about 25 million tons in a typical year. Russia’s exports, too, are likely to face more sanctions.
The most immediate risks — which are not priced in commodity markets — lie in Ukraine’s as yet unsown spring crops, corn and sunflowers, according to Stefan Vogel, head of RaboResearch’s Australian unit.
The European Union, for example, sourced 40-60% of grain feed for animals from Ukraine. Fogel said the United States would be a potential supplier but the European Union restricts genetically modified crops, making Brazil the only alternative major exporter.
Grain crops in Brazil were poor last year, so there is an expectation that supplies will not be low.
“Brazil needs to be exceptionally good – it doesn’t look like it now, but we are in the early stages – to put price pressure on the corn market,” Fogel said.
While richer nations can switch supplies and replace crops, poorer nations do not have that luxury.
Assuming long-term disruptions, the global number of undernourished people could rise from 8 to 13 million in 2022/23, with the most pronounced increases occurring in the Asia-Pacific region, followed by sub-Saharan Africa, the Near East and the North. Africa,” the Food and Agriculture Organization said.
Vogel expects the impact on food prices to continue, particularly because energy prices are likely to remain high, driving up the cost of inputs including fertilizers.
“I think the grain market should work through this [shock] Not just in the next two months, but maybe in the next two years.”