Why record wheat prices are a matter of global concern
Less rainfall or drought in major producing countries was already a cause for concern before markets invaded Russia before Russia’s invasion of Ukraine in February.
Since then, wheat-exporting powerhouse Ukraine has struggled to sell and sow its crops, putting consumers in poor countries at risk of poverty and even famine.
Sebastian Abis, head of the Dimitar Agricultural Think Tank in Paris and an expert at the Institute for International and Strategic Relations, explains what the risks are:
Is it possible to replace wheat with something else?
“It’s very difficult. Wheat is the most important food grain for global food security: it is eaten by billions of people in the form of bread, flour or semolina.
“Corn grows in large quantities but is mostly used for animal feed or industrial purposes.
“Beyond its nutritional value, wheat is a very social and democratic product that enables people to make food at low cost – and it is often subsidized.”
But are prices keeping consumers out of reach in some countries, such as Lebanon or Yemen?
“Yes, because of the deficit and you can’t produce it anywhere. You can grow it in temperate climates, but there are only a dozen countries that produce a lot and can export it, especially Russia, Ukraine, the United States, Australia.
“In recent years, the United States has produced less and less because they are switching to corn and soy. After the Soviet era, the two countries that advanced were Ukraine and Russia.
“Ukraine has accounted for 12-13 percent of global exports in recent years.”
Is the lack of Ukrainian production the cause of the current situation?
“At the same time we have a terrible geopolitical situation, with multilateralism collapsing, to which we must add alarming climate events, droughts in the South Mediterranean basin, concerns in the United States and Europe.”
“India, which was an exceptional crop last year and the reserves that enabled it to sell more in the market, have faced a severe drought and will not be able to export.
“Prices that were already high before the war are now exploding: wheat reached 440 euros ($ 463) per tonne on the Euronext market on Monday.”
It came after India announced that it would no longer export wheat. Why?
“India has set an ambitious target of 10 million tonnes of exports. It sold about 3-3.5 million tonnes before the embargo was imposed, so one of the questions is whether it will keep its promise.
“The situation is tense because there is no country that can bring more exports to the market than usual. Perhaps Russia will get a good yield.
“Even if the war ends, Ukraine’s production and exports will not return immediately.”
Have we reached the peak of the crisis before the harvest in the United States and Europe this summer?
“We have a real long-term risk. We have not seen all the push yet, because over the last two months we have seen in the world market the fulfillment of the agreement signed before the Russian invasion. We are now entering a difficult part.”
What about stock?
“For wheat, we have about 270 million tons for a planet that costs about 800 million a year. About half is in China, which has a one-year reserve cost. With the exception of China, grain reserves are at their lowest level in 25 years.
“We need international solidarity and cooperation. For food security we cannot leave countries to their own struggles but at the same time you should not be surprised that some countries are looking for themselves first and foremost.”
“We need to produce in places where we can produce, especially in Africa. But for that we need peace and security.”
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