Ukraine War Drives Food Prices to Record High
Freshly-baked bread in Tunis, Tunisia, last month.Photo: anis mili/Agence France-Presse/Getty Images
By Alistair MacDonald
and Patrick Thomas
Apr. 8, 2022 1:55 pm ET
Global food prices hit a new record high in March, the United Nations said Friday, as the war in Ukraine threatens food shortages in some of the world’s poorest countries and deeper inflation challenges for Western food manufacturers.
The war has disrupted Ukraine’s prodigious exports of wheat, sunflower oil and other produce, and impacted food exports from Russia, upending a part of the world that has become increasingly important to feeding a growing global population.
The absence of produce from the region is also lifting the prices of commodities produced elsewhere as countries and companies seek alternatives to their usual supplies. Higher grain prices in particular also threaten a knock-on impact on beef and other meat as producers rely heavily on grain to feed livestock and poultry. The higher costs mean some of the largest food companies in the U.S. will likely continue to raise prices on consumers for products from cereal to deli meat, analysts say.
The U.N. Food and Agriculture Organization said Friday that its Food Prices Index—a measure of the most commonly traded food commodities—rose 12.7% to hit 159.3 points last month, up from a previous high of 141.4 in February. The March reading is the highest since the index was developed in 1990.
Much of the rise has been driven by higher grain prices. The FAO’s cereal index rose more than 17% month-on-month, boosted by uncertainty surrounding grain exports from Russia and Ukraine. The two countries accounted for 30% of global wheat exports and 20% of corn over the last three years, the FAO said. They also produce a large proportion of the world’s sunflower oil, eggs and other agricultural produce.
The FAO also said vegetable oil prices were up 23.2%, sugar had gained 6.7% and meat was 4.8% higher.
Russia’s invasion of Ukraine has closed off the Black Sea ports that funnel much of the produce grown in the region around the world. Experts fear the impact of the war could be long lasting, as the fighting churns up farmland, smashes infrastructure and deprives farmers of fuel and fertilizers, which will likely reduce future crop yields. Many workers have also left the country or joined the fight.
Andrii Gogolov, whose farm is in a part of southern Ukraine currently occupied by Russian forces, said he is unable to export produce at the moment, including 500 metric tons of soya he has in his warehouse. He also said he probably wouldn’t grow any corn this season because of damage to the local irrigation system.
“This is a disaster for Ukrainian farming,” he said.
The Ukrainian government predicts that there will be 25% less land planted this spring than usual, though some experts say that forecast is too optimistic. “If it is only 25% I would be amazed,” said John Rich, executive chairman of MHP, one of Ukraine’s biggest grain exporters.
Higher agricultural commodity prices are a windfall for big agricultural companies like Bunge Ltd. and Archer Daniels Midland Co. that buy and transport crops, analysts say.
U.S. farmer cooperative CHS Inc., which has a large grain-trading business, on Wednesday said it swung back to profit in the quarter ended Feb. 28. “Strong demand combined with global market volatility contributed to higher earnings,” said Chief Executive Jay Debertin.
Shares of ADM and Bunge are up about 40% and 25%, respectively, this year.
For food producers that rely on grain and meat as ingredients for their products, though, higher commodity prices add to existing inflationary pressures amid rising costs for fuel and labor.
Conagra Brands Inc. said on Thursday that surging inflation in ingredients and trucking is pushing the company to raise prices again.
The Chicago-based food manufacturer, which makes Healthy Choice frozen meals and Slim Jim meat sticks, has already lifted prices for its products over the past year, citing higher supply-chain costs arising from the Covid-19 pandemic and, more recently, Russia’s invasion.
Conagra said persistent inflation had led the company to lower its earnings expectations for its fiscal year that ends in May.
So far, though, Conagra said U.S. shoppers don’t appear deterred by higher prices for its products. The company said its sales volumes at supermarkets have remained strong, but that that isn’t the case for some of its competitors.
Meat companies from Tyson Foods Inc., the biggest U.S. meat processor by sales, to Hormel Foods Corp., the maker of Spam, have also so far said strong demand has allowed them to pass along higher costs to their customers.
However, meat and poultry processors will be challenged to pass on all of the more recent higher costs to consumers, according to analysts at Rabobank, a major agricultural lender.
Higher food prices are most likely to have an outsize impact on the world’s developing countries, analysts say. Egypt and Indonesia are the largest buyers of Ukrainian wheat, each accounting for more than 15% of Ukraine’s wheat exports, according to data from Trade Data Monitor.
Recent increases come at a time of already high food-cost inflation, given disruptions related to the Covid-19 pandemic and poor harvests in the U.S., Canada and other countries.
The Iraqi government has already released some of its strategic reserves of wheat amid public protests and demands for easing of taxes on food imports.
The impact of higher prices is also becoming clear in Yemen, said Yasmin Faruki, a Washington, D.C.-based policy adviser at nonprofit Mercy Corps who recently visited the country.
The price of a 50-kilogram bag of flour is up 42% from a month ago, while the price of cooking oil is up 36% over the period, she said. Yemen is one of the 10 biggest importers of wheat from Ukraine and Russia, buying around 1.5 million metric tons of the grain from those two nations a year, according to Mercy Corps.
“People are now having to split already limited amounts of food,” Ms. Faruki said.
- https://www.wsj.com/articles/ukraine-wa ... 1649440528
Ukraine adds to Yemen's woes as hunger emergency spreads and lack of funding leaves millions vulnerable
“We are looking at a seismic hunger crisis if we do not step up now. Unless we receive immediate funds, hungry people will lose assistance right at the time they need it most,” said WFP Executive Director David Beasley on the eve of a high-level pledging event for Yemen. “Funding for Yemen has never reached this point. We have no choice but to take food from the hungry to feed the starving.”
WFP was forced to reduce food rations for eight million people at the beginning of the year due to a shortage of funds. For now, five million people who are at immediate risk of slipping into famine conditions have continued to receive a full food ration. But unless new funds arrive further reductions will be unavoidable.
- https://www.wfp.org/news/ukraine-adds-y ... vulnerable
Saudi appeasement for oil price relief.
NYTimes also did an episode on food supply recently in its daily brainwash of the professional classes.
Alloneword already linked to Christian's youtube, but he is an excellent resource on this stuff, and most importantly, his channel and particular interest in food supply chain collapse predates the pandemic, which has seen a saturation of opportunists trying to build an audience on clickbait conspiracy theory. He also offers a hopeful and simple solution anyone can do at the individual or community level. Grow a garden. He interviews the types of people urbanites like myself are out of touch with but have useful knowledge to impart. He is a devout Christian, isn't preachy, just slips out in when he expresses his conceptualisation of things. But a secular mind can just replace the concept of 'God' with that of 'Nature' and everyone is on the same page from an ethical or practical standpoint.