Russia’s war on Ukraine has magnified inflationary shockwaves across the U.S. and the world, including startling price increases for gasoline, oil – and food.
Though it's too early to predict how much prices will rise, the cost of corn, barley and other grains is higher. Cooking oil prices, from sunflower to cottenseed, have skyrocketed. Fertilizer costs are up. Grain-carrying ships have been blocked from ports.
Even beer prices, already affected by the cost and supply of aluminum cans, could jump. "About one-fifth of the barley used in beer production comes from Russia and Ukraine," Bart Watson, chief economist at the Brewers Association, told USA TODAY.
But it's wheat – a third of which the world imports from Russia and Ukraine – that could cause some of the biggest ripples in world food markets.
Triggered by inflation, U.S. prices began rising last year as the economy struggled to rebound from the coronavirus pandemic. After Russia invaded Ukraine on Feb. 24, increases accelerated over fears of reduced oil production and disruptions in agriculture and energy supply chain disruptions, USA TODAY reported.
Wheat exports provide a good snapshot of Ukrainian and Russian positions in the world food chain:
How much of the world's wheat do Russia and Ukraine supply?
Global food prices reached the highest level since 2011, the Food and Agriculture Organization, a United Nations food agency, reported Feb. 3. That increase was traced to the COVID-19 pandemic and supply chain breakdowns.
"The food supply chain is so integrated globally, that it's hard to imagine that something happening half a world away is going to affect the price of food here in the United States," says Robb MacKie, president and CEO of the American Bakers Association, an advocate for the commercial baking industry. "But it's all intertwined."
And it's not just grain that's affecting the food industry. "A lot of folks aren't really talking about disruptions in the natural gas supply chain, since everybody's focused on gasoline at the pump," MacKie says.
"But we're seeing significant spikes in natural gas prices as well. And we use a lot of very large ovens that are fueled by natural gas."
All of this adds up. "We've been in pandemic mode for just over two years now," MacKie says. "That's really stretched the supply chain."
Wheat production, demand keep growing
The war is "exacerbating a series of factors that were pushing up wheat prices before the conflict," says Steve Mercer, vice president of communications for U.S. Wheat Associates, an export market developer for the industry.
Droughts affected crops in the U.S. and Canada recently, cutting exports as world demand was rising. "Demand for wheat around the world has gone up and up," Mercer says. "New records were set almost every year."
Part of that was a surge in consumers.
"In areas like Latin America and Southeast Asia, you're seeing a huge increase in disposable income and migration from rural areas to the cities for jobs," Mercer says. "The whole pattern of food demand changes."
In the last two years, "we've actually produced less wheat than what was in demand," Mercer says. "There are stocks available but that really puts a lot of emphasis on prices."
Where Russia, Ukraine sent wheat exports in 2020
Considering Russia and Ukraine export almost 30% of the wheat the world uses, the war could push prices even higher. Worldwide prices for food and livestock feed could jump from 8% to 20%, according to the FAO. That could trigger a rise in global malnourishment and increase the risk of food insecurity for some countries, the agency said.
Nations in North Africa and the Middle East depend heavily on Russia and Ukraine for wheat. Those countries have also been hit by droughts and higher food prices and could experience political instability.
The war is holding “a sword of Damocles” over the global economy, said the U.N. on March 14. Secretary-General Antonio Guterres said poor developing countries face skyrocketing food, fuel and fertilizer prices and are now seeing their breadbasket “being bombed.”
US bread prices are rising
The U.S. doesn't buy wheat from Russia, but American and Western sanctions will make it difficult for Russia to export its wheat and other grains. That, and Ukraine halting its exports, will make wheat, already rising because of inflation, more expensive across the globe.
Shortages could also result in disputes over how grains should be grown and used. "I think there's going to be competition for farmland, for grain, in the coming year," Watson said. "The world market will react to any grain that would normally be exported from Ukraine, which won't be this year."
Global price of wheat
While nearly every nation could be affected by higher prices and shortages, it's the non-affluent ones that will feel them most. Nations that have driven recent increases in wheat demand could also be affected.
Black Sea blockades prevent wheat shipments
In addition to production problems and export bans, shipments of wheat are also being disrupted. In the Black Sea, a key shipping route, Russia is blocking hundreds of ships carrying wheat, said Ursula von der Leyen, European Commission president on March 23.
"The ports are closed, you can't even export what's already there," MacKie says. That will leave buyers in the Middle East and parts of Africa – the best customers of Ukraine and Russia – scrambling to find wheat and other grains elsewhere.
In the United States, shortages aren't predicted. Consumers, however, could see price increases on many grocery store shelves.
"There are hundreds of products that use wheat – flour, cookies, crackers, pretzels and more," Mercer says. "It's a binding agent, but it's also a basic staple ingredient."
"When wheat prices go up, wheat costs more for flour millers," Mercer says. "Some of that cost is passed on to producers and grocery manufacturers. I suspect those prices will definitely be shared at some point."
And though it's too early to predict how much U.S. beer prices will rise, shortages are highly unlikely. "This isn't a threat to beer production," Watson says. "It'll be available."
CONTRIBUTING Jim Sergent and Veronica Bravo, USA TODAY
SOURCE USA TODAY Network reporting and research; oec.world; Associated Press; Department of Agriculture; Federal Reserve Bank of St. Louis; Brewers Association; American Bakers Association; U.S. Wheat Association; Cornell University