The UN index of food prices, already at a record high, rose by 12.5% in reaction to Russia’s invasion of Ukraine, with world wheat prices soaring nearly 20%, said the Food and Agriculture Organization. Wheat prices were so high, said USDA analysts in a separate report, that consumers in sub-Saharan Africa may find it cheaper to eat rice, ordinarily the more expensive staple grain.
World commodity prices leapt to their highest levels ever as the invasion sent shock waves through grain and vegetable oil markets, said the FAO in its monthly Food Price Index report. Wheat prices shot up 19.7% and corn 19.1% during March. Russia and Ukraine usually account for 30% of wheat on the world market and supply 20% of the corn sold internationally. Rice prices were unchanged and were 10% lower than a year ago.
“The recent phenomenon of stable rice prices and higher wheat prices may impact consumer choices,” said USDA’s Grain: World Markets and Trade report. Rice from India, the world’s largest exporter, was being offered at lower prices than wheat or corn. The last time price quotes from major wheat exporting nations were higher than rice was during the food price crisis of 2008.
“Countries that consume wheat as their staple grain are unlikely to suddenly change buying habits, but countries with consumers of both wheat and rice may prefer rice based on the comparatively lower prices,” said the USDA report. “Sub-Saharan Africa is a price-sensitive region that consumes roughly equal amounts of both grains and may shift consumption to the lower-priced rice or local alternatives.”
Overall, cereal grain prices spiked 17% during March, mostly because of the sharp increases in wheat and corn prices, said the FAO, “largely driven by conflict-related export disruptions from Ukraine and, to a lesser extent, the Russian Federation. The expected loss of exports from the Black Sea region exacerbated the already tight global availability of wheat.”
Vegetable prices climbed 23% during March, said the FAO, with Ukraine as the leading factor.
“International sunflower seed oil quotations increased substantially in March, fueled by reduced export supplies amid the ongoing conflict in the Black Sea region,” said the FAO. “In the meantime, palm, soy, and rapeseed oil prices also rose markedly, buoyed by rising global import demand in the wake of sunflower oil supply disruptions.”
The FAO index is based on the monthly change in prices of a basket of five groups of food commodities. Its index of meat prices rose nearly 5% in March, to reach a record high.
The sugar index was up nearly 7%, in part on expectation that a rise in petroleum prices, a ripple effect of the invasion of Ukraine, would divert sugar in Brazil to production of biofuels and away from food use. The dairy index was up for the seventh month in a row.
Russia will be the second-largest wheat exporter in the world this marketing year with sales of 33 million tonnes, only 2 million tonnes below the pre-invasion forecast, said the USDA in its monthly WASDE report. By contrast, Ukrainian wheat exports were estimated at 19 million tonnes, down 5 million tonnes from the February estimate.
“Its Black Sea ports remain closed … ,” said the USDA. “The majority of Ukraine’s exports have already been shipped with limited additional amounts expected for the remainder of the 2021/22.”
U.S. wheat exports would be the smallest in nine years, at 785 million bushels in the marketing year that ends June 1, said the USDA. U.S. wheat prices were the highest among the six major wheat exporters on a Freight On Board basis last week.
“Wheat production in Ukraine is now forecast to fall below the five-year average, primarily reflecting expectations that at least 20% of the winter planted area may not be harvested due to direct destruction, constrained access, or a lack of resources to harvest crops,” said the FAO, discussing the 2022 outlook in a Cereal Supply and Demand Brief. “Furthermore, yields are also expected to decline in 2022, as disrupted access to inputs and farmland is seen hindering the timeliness of agricultural operations.”
A larger-than-average wheat crop was expected in Russia, thanks to good weather early in the growing season, said the FAO; “however, this outlook remains preliminary particularly in consideration of uncertainties regarding the importation of some agricultural inputs.”