The escalating situation in Russia and Ukraine has added another fire to the rising global food prices.
According to the data of the Chicago futures exchange, as of the 13th, wheat futures in the Chicago market in recent months were reported at US $7.98/bushel, with a one-day increase of more than 4% recently. The price of wheat futures delivered in may once hit the largest increase in more than four months.
Not only that, corn and soybean related futures also rose. As of the 13th, corn futures in recent months in Chicago market were reported at $7.99/bushel, and soybean futures in recent months were reported at $15.86/bushel.
Wang Na, research director of Everbright futures Shenzhen Agricultural Products Group Co.Ltd(000061) , said in an interview with China business news that Russia and Ukraine are important suppliers and exporters of the global bulk market. The aggravation of the situation in Russia and Ukraine may affect the global main grain supply. It is expected that the supply of wheat and corn may bear the brunt, and the global wheat and corn buyers will also be affected.
Russia and Ukraine are both important grain suppliers and exporters
Wang Na said that the direct reason why the situation in Russia and Ukraine has a great impact on global food prices is that Russia and Ukraine are important grain suppliers and exporters in the world. If the situation in Russia and Ukraine escalates, it will lead to the continued decline of Russia's wheat exports, which have gradually shrunk, and then form a phased positive support for the international wheat market.
According to the data of UN COMTRADE, a market research institution, at present, the combined wheat exports of Russia and Ukraine account for nearly 25% of the global share. The USDA forecast shows that in 2021 / 2022, Russia's wheat production will be about 75.5 million tons, a decrease of 9.85 million tons compared with the same period last year. Russia exported 35 million tons of wheat, a decrease of 4.1 million tons over the same period last year.
Wang Na also said that Russia and Ukraine are also important corn suppliers and exporters in the world. Although their output is lower than that of the United States, Brazil and other countries, the smooth settlement of the situation between Russia and Ukraine has also affected the cost changes of major corn importing countries in the world due to their low increase in export prices.
According to UN COMTRADE, at present, the combined corn exports of Russia and Ukraine account for nearly 13% of the global share. According to the data of market research institution fastmarkets agricensus, by the end of 2021, the export price of Russian wheat had been reported at US $286 / ton, up 30% year-on-year, while the average price of global wheat had increased by more than 50% year-on-year.
In addition, according to CRU, a business consulting firm, Russia exports nearly 50% of the world's ammonium nitrate fertilizer, most of which are eventually sold to Europe. According to the data of green markets, a market research institution, the weekly index of North American fertilizer prices had risen to US $961.2/ton in the week ending on the 13th, up 79.9% year-on-year. Natural gas accounts for nearly 80% of the production costs of European nitrogen fertilizer manufacturers. Due to the rising price of natural gas, Yara, a European chemical giant, was forced to reduce production recently, which affected the supply of chemical fertilizer in Europe.
will global food prices continue to rise?
According to British media reports, a member of the European Parliament from Germany said: "if the situation in Russia and Ukraine escalates, some of us are worried that food production may fall by 10%, although the optimistic view is that it will only fall by 5%."
Some analysts pointed out that what is more worrying is the possible rise in the price of chemical fertilizer. "Due to the high price of chemical fertilizer last year, many farmers have delayed buying enough fertilizer. Many European countries are about to meet the second round of fertilization season. If Russia's export of chemical fertilizer to Europe decreases, many European farmers may reduce or not apply fertilizer from May to June."
At present, both agricultural enterprises with business in Russia and Ukraine and major buyers in Europe are paying close attention to the progress of the situation in Russia and Ukraine and putting forward contingency plans and measures.
Cargill said it was paying attention to its business in Ukraine. Eurochem group, one of Europe's largest fertilizer producers, said it was trying to gradually diversify its business into other markets. In order to increase its fertilizer production assets in Austria, Germany and France, the company recently offered 455 million euros to acquire Nordic chemical's business including fertilizer.
European countries are important buyers of grain exports from Russia and Ukraine, and these countries seek diversified international logistics channels. Bate toms, chairman of the British Chamber of Commerce in Ukraine, said that in recent years, the UK and Ukraine are strengthening railway transportation, which can avoid the geopolitical situation in UK Ukraine trade, and the railway can also meet the freight demand of bilateral trade in a short time.
Taras kachka, Deputy Minister of economy of Ukraine, said that Ukraine was ensuring the normal operation of Railways and seaports, and the Black Sea region, an export hub of these regions, was particularly important.
Andrey sizov, CEO of sovecon, a Russian agricultural and food consulting company, believes that countries in the European region have a variety of ways to diversify the supply and transportation of grain. In contrast, countries in central and northeast Africa such as Lebanon, Turkey and Egypt are more vulnerable to the escalation of the conflict between Russia and Ukraine and the rise of food prices, because these countries are highly dependent on food in Russia and Ukraine, and these countries have poor economic environment and weak anti risk ability.
FAO data show that Lebanon's food mainly depends on imports, and 55% of wheat is imported from Ukraine; 23% and 62% of Turkey's wheat imports come from Ukraine and Russia. According to the world bank, Lebanon's economy shrank by 10.5% and its inflation rate (CPI) reached 145% in 2021. According to the data of the Turkish Bureau of statistics, the country's inflation rate reached 48.69% in January this year, a new high in nearly 20 years.
"If the conflict between Russia and Ukraine is imminent, it may lead to social unrest and conflict in the above-mentioned countries in central and northeast Africa. Although this is not the largest and only driving force, it is likely to be a trigger," sizov warned
