The war in Ukraine primarily slowed down the main agricultural supplies that were shipped to the world market from the Black Sea region, from wheat to vegetable oil to fertilizer, because Ukrainian ports were closed and ships were far away. Sales outside Ukraine remain sluggish, and spring plantings remain in doubt as the war engulfs the country’s farmland. Farmers in Ukraine are moving forward wherever possible, but the ongoing fighting could mean the crop will not be planted or the crops of other crops already sown may be damaged. MHP SE, a major food exporter in Ukraine, played a leading role in providing supplies to the Ukrainian army and civilians in the bombed-out cities. Russia’s wheat shipments, on the other hand, have bounced back, with some grains being exported to countries that are usually imported from Ukraine.
Energy prices began to rise in 2021 as the economy recovering from the epidemic went out of supply and energy and food were deeply involved. In Europe, rising natural gas prices – a key input for nitrogen fertilizer production – have already forced production to cut some benefits. Fuel prices, used by farmers to heat granaries and to operate equipment used for food production, are also skyrocketing. Adding to the pressure is sanctions against Russia, the world’s leading energy supplier, and the United States and the United Kingdom are pushing for a ban on Russia’s imports of crude and other oil products. Russia’s war in Ukraine has led the United States to tap nearly a million barrels of oil a day for six months, starting in May, as fuel costs rise, an unprecedented move that reflects the Biden administration’s concerns about rising gas prices and supplies. Deficit
Fertilizer prices, crucial to the growth of most crops, are already rising worldwide before the onslaught between supply disruptions and production problems. Now the war has brought new issues. Russia, a major supplier of nutrients to each major crop, has called on domestic fertilizer producers to cut exports in March, raising fears of a shortage of crop inputs that are vital for farmers. Russia’s move adds uncertainty to world markets, while Brazilian farmers – the world’s largest importer of fertilizers – are already struggling to get nutrients for their crops. Russian President Vladimir Putin has said his country will supply fertilizer to countries that have “friendly relations” with Russia, although it must first guarantee the supply of fertilizer for the domestic market. The astronomical rise in prices is even persuading some US farmers to plant more soybeans than corn, a move that could increase global supply pressures.
Governments are taking steps to keep food supplies close to home, a move that could prolong food inflation. Hungary, Argentina, Turkey, Serbia and Egypt have imposed or threatened restrictions on agricultural exports from wheat to cooking oil in an effort to curb domestic prices and protect local food supplies. Disrupted trade flows in the Black Sea region could hurt countries in Africa and Asia that rely on European bread baskets to feed their populations. Egypt, for example, is the largest importer of wheat and in 2020 received 86% of its supply from Russia and Ukraine.
Shock waves are spreading on shelves in Turkey amid concerns over rising sunflower oil prices. Even Indonesia, the world’s largest exporter of edible oils, is feeling the pressure: supermarkets are restricting buyers of cooking oil per pack, and families are bringing their young children to line up so they can buy more. Concerns over food supplies are also growing in China and India, two of the world’s most populous countries. Chinese buyers are gathering US corn and soybeans as Beijing emphasizes food security.
When purchasing declines because consumers cannot afford to buy, economists call it “demand distraction.” In India, shopping has declined due to the blistering of vegetable oil. The country is the largest importer of edible oil, essential for frying, baking and other types of cooking and consumers are extremely sensitive to prices. In the United States, budget constraints mean that food banks and pantries need to ration the country’s hungry because Americans struggle with rising spending on gasoline, utilities and rent, leaving less money for groceries.
Other global suppliers may take steps to fill stocks. India, for example, has increased its wheat shipments in recent years and could increase its export record to 12 million tonnes if the conflict continues. But many countries that can normally meet the deficit are facing production problems on their own. In Brazil, the main supplier of corn and soybeans, the crippled drought crop has dried up. Fields in Canada and parts of the United States also dried up last year due to dry weather. Wheat cultivation in the United States is expected to increase by only 1% by 2022, according to a recent official report, and that acre will be months before harvest.
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