Russian wheat squeeze sows seeds of global unrest
LONDON, March 9 (Reuters Breakingviews) - Russia is scattering the seeds of political instability across the world. Since Moscow launched its full-scale invasion of Ukraine two weeks ago, prices of wheat, maize and soybean have rocketed to record or near-record levels. A previous price spike in 2007 led to food riots in Africa and Asia. This year’s bread crunch may be worse.
Even before President Vladimir Putin authorised his assault, the cost of staples was rising sharply as demand bounced back from the Covid-19 pandemic. The Food and Agriculture Organization’s Food Price Index jumped 21% year-on-year in February. Since then, the cost of a bushel of wheat has soared by nearly 80%, to above $14. Traders are fretting about interruptions to exports from Russia and Ukraine, which between them account for nearly 30% of the world’s traded supplies. By comparison, wheat has traded at around $5 a bushel for much of the last decade. In 2011, when rising food prices fuelled protests and revolutions across the Arab world, it was around $8.
This time the costs will particularly fall on poorer countries. The average household in Nigeria, Africa’s most populous nation, spends over half its income on food, compared with just 6% in the United States, according to the World Economic Forum. In Egypt, routinely the world’s biggest wheat importer due to generous state bread subsidies, the government is braced for a nearly $1 billion hit to this year’s budget, almost 1% of total planned spending.
The upheaval is only just beginning. Although farmers from Ireland to Kenya are rushing to get more crops in the ground, it will be months before their harvests hit the market. In addition, farmers have to contend with higher oil prices and a looming shortage of fertilisers: Russia and Ukraine are also big exporters of nutritious minerals like potash. Meanwhile, national larders are worryingly empty. Lebanon, whose main grain silo blew up in 2020, only has two months of reserves. Egyptian wheat stocks are at their lowest in at least a decade.
The last time grain prices jumped so dramatically was in 2007, when wheat rose to more than $13 a bushel following poor rice harvests in Vietnam and India. Riots ensued from Indonesia to Ivory Coast, Mexico froze food prices for a year and Haiti’s government fell. The world is set to reap an equally grim global harvest.
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(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)
- Chicago wheat futures hit a record high of $14.25 per bushel on March 7 amid intensifying concerns about global supplies due to Russia’s invasion of Ukraine.
- Ukrainian ports remain closed because of the conflict and dealers are reluctant to purchase Russian supplies for fear of Western sanctions.
- Since Russian troops entered Ukraine on Feb. 24, maize and soybean prices have also leapt to their highest since 2012.
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