The food price inflation all of us are experiencing in the grocery store has not yet been impacted by the war in Ukraine.
Here’s why.
Russia and the Ukraine are key suppliers of wheat, sunflower oil, barley, fertilizers and fuel to the EU, Turkey and North Africa, as well as many other countries in the Middle East. In fact, because of the war, the scramble to reorganize supply chains started a month ago.
Complicating the supply chain issues is that the war will prevent Ukraine from not only harvesting their winter crops but also planting their normal spring crops, such as wheat, barley and sunflower. Interestingly, the recent USDA market report didn’t take this impact into account and the potential reduction in the supplies of crops will have a significant ripple effect.
In addition, what isn’t being discussed but is definitely on the minds of those of us with Agricultural expertise, is the all-time supply squeeze in fertilizers that will impact next year’s food supplies and prices.
Fertilizer and fuel prices were already high but restricted access to Russia and Ukraine will more than likely increase the impact and cost of both, making it difficult for most producers to afford. Because of this, farmers will more likely use less fertilizer which means lesser yields, which further limits supply.
This scenario won’t go away with one crop planted in either Hemisphere–even if the war ends today and we have perfect weather. Globally, farmers will need two, perhaps three growing seasons to rebuild inventories.
Food in the US will be more expensive–perhaps more expensive than we have ever seen–and for an extended period of time. Wealthier nations, such as the EU, will also experience historically higher prices. In less developed countries there will be price rationing and possibly shortages.
In the early 70’s when the US experienced the “Great Grain Robbery” we saw prices rocket similar to what we have recently watched in wheat. In the 70’s we also experienced export embargoes and shortages. It wasn’t only lines at the gas pump. You can find pictures from the early 1970’s of American families protesting food prices in picket lines.
Rising wheat prices have historical relevance across the globe. The Arab spring was triggered by increasing bread prices, as was the French Revolution.
Here in the United States, we could see a return to scarcity and shortage. Are we ready for that?
