HIGHLIGHTS
- Global wheat prices are up more than 50% this year, and the Kremlin has collected $1.9 billion in revenue from wheat export taxes this season.
- Many people talk about bans on Russian goods, but the reality is that these importing countries have not taken any direct action on agricultural goods from Russia.
- Ukrainian President Volodymyr Zelenskiy has said that Russia is “stealing” its grain in the occupied regions.
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Volatile food market
Although Russia ran into some problems shortly after the invasion, it is now delivering its agricultural products at a faster rate than last year – with international merchants such as Viterra and Cargill still shipping make shipments. It even ships some volumes to Israel, which usually buys from Ukraine, according to AgFlow. Russia’s wheat shipments for the 2021-2022 season totaled 34.1 million tonnes as of this week, down 11% from a year earlier, Interfax reported.
The war has blocked Ukraine’s grain exports by sea, cutting off vital supplies to countries from Somalia to Egypt. The disruption, due to hot weather and drought affecting wheat crops in other parts of the world, has pushed grain prices to near-record highs and is threatening hunger in parts of the Middle East. East and North Africa.
Meanwhile, Russia has continued to ship its wheat at higher prices than it is today, finding well-meaning buyers and reaping more revenue per ton. They are also expecting a good wheat crop next season, indicating they will continue to profit from the situation. Global wheat prices are up more than 50% this year, and the Kremlin has collected $1.9 billion in revenue from wheat export taxes this season, according to estimates from agricultural consultant SovEcon.
“This is about using food as a weapon of war through global leverage, not directly attacking populations.” said Tim Benton, research director for emerging risks at Chatham House.
The consequences are alarming
By blocking Ukraine’s ports, Russia forced the country to try shipping grain by road, resulting in exports reaching only about a quarter of the usual potential volume. “Not opening ports is a declaration of war on global food security,” said David Beasley, head of the United Nations World Food Program at the World Economic Forum in Davos on Monday.” Beasley said the lack of access to food could spur millions of people to emigrate. For every 1% increase in hunger, migration increases by 2%, he said, noting that 49 million people are “knocking on the door of hunger” in 43 countries.
Hugo Boudet, an analyst at AgFlow, said Russia has also effectively eliminated its main competitor, noting that from April 1 to May 23, Russia significantly increased its shipments its cups to countries including Turkey and Iran compared to last year. “Ukraine is the main competitor” he said. Take this together and Russia has a big advantage in this area because of less competition. “Many people talk about bans on Russian goods, but the reality is that these importing countries have not taken any direct action on agricultural goods from Russia.”
Possibility to continue in the future
Current trends are likely to persist for the foreseeable future. In Ukraine, farmers planted crops for the next season under the threat of bombs, and even cleared corpses from their land. For its part, Russia is expected to reap a record harvest in the new crop thanks to good weather. In contrast, other major wheat suppliers from the US to Western Europe are seeing droughts threatening their crops. Russia has also dominated sunflower oil shipments since the war began, after Ukraine’s seaborne exports were cut.
Ukrainian President Volodymyr Zelenskiy has said that Russia is “stealing” its grain in the occupied regions. Two Ukrainian traders say that the Russian military has confiscated grain and goods in the occupied areas. Kremlin spokesman Dmitry Peskov agreed that a food crisis was being created but blamed “those who have imposed sanctions against us and the sanctions themselves that are in effect”. The US and European sanctions do not explicitly target food exports, but some on banks have made financing more complicated. The cost of insuring and transporting Russian grain skyrocketed after the invasion due to sanctions and the increased risk of sailing in the Black Sea, where some ships shelled at the beginning of the war.
While Russia’s state coffers are growing with revenue from commodity exports, Russians are also suffering from rapidly rising food prices. Russia may be self-sufficient in raw materials like grains and sugar, but it depends on imports for everything from packaging to processed foods, flavorings and essential ingredients. Foreign companies from Nestle SA to Unilever Plc left or limited their operations in Russia after the invasion. The initial wave of panic buying after the war began may have subsided, but food inflation is at its highest level since 2004.
Ngoc Ha
Russia – Ukraine war could have dire impacts on global supply chains
