Russia’s invasion of Ukraine is threatening shockwaves through two of the world’s staple grain markets, prompting countries that rely on imports from the region to seek alternative supplies and heightening concerns about food inflation and hunger.
Grain exports from Russia will probably be on hold for at least the next couple of weeks, the local association said on Friday, after turmoil erupted in the Black Sea. Ukrainian ports have been closed since Thursday.
That means the war has temporarily cut off a breadbasket that accounts for more than a quarter of global wheat trade and nearly a fifth of corn. Major importers are already looking at their options to buy from elsewhere, and prices for both grains swung wildly in the past two days.
The disruptions come at a time when global crop prices have already soared to records, while hunger has surged dramatically in the past two years.
“There will be a big impact with respect to wheat prices and prices of bread for ordinary people,” World Trade Organization Director-General Ngozi Okonjo-Iweala said Friday.
Russia and Ukraine supply crops to a long list of countries around the world, including large volumes to buyers in the Middle East and Africa, who will have to look elsewhere and probably pay more for both the grain itself and the cost of shipping. Egypt, the top wheat importer, had scheduled a tender on Thursday but canceled it after only receiving one offer—of French wheat.
“It is difficult to plan any transactions at the moment,” said Eduard Zernin, the head of the Russian Union of Grain Exporters. “I think it might take a couple of weeks.”
Demand is beginning to shift to alternative export origins including India and the European Union, according to two people familiar with the matter.
In Tunisia, the agriculture ministry said it’s looking to Uruguay, Bulgaria and Romania for supplies of soft wheat to shield itself from possible supply disruptions, while Indonesian flour mills are also hunting for other origins due to the escalating crisis. A Moroccan millers group said it would turn to Argentina, France and Poland, according to chairman Abdelkader El-Alaoui.
However, the outsized role that the Black Sea plays in global grains markets means that alternatives may be limited. Global grain stockpiles are already declining, making it more difficult to offset lost supply.
“It really does put a squeeze on an already tight market and creates a huge amount of uncertainty for the coming weeks if not months,” said James Bolesworth, managing director at U.K.-based CRM AgriCommodities. “For wheat and corn, it pushes demand to other parts of the world where we know stocks are tight.”
In the U.S., the war in Ukraine may have a modest impact on food costs, though grocery inflation is likely to ease this year regardless of the conflict, said Joseph Glauber, former chief economist for the U.S. Department of Agriculture. The crisis may have a more severe impact on food prices in the Middle East and Africa, especially if spring planting is disrupted in Ukraine, he said.
The impact on U.S. consumers will be muted because food commodities account for only a small portion of the price Americans pay for groceries—less than 15 cents of each dollar spent, according to USDA. Volatility in global wheat markets have little impact on the supermarket cost of a loaf of bread or a box of cereal.
Where the U.S. will likely be more affected is in the cost of grains such as corn and soybeans used to feed livestock and poultry. It could exacerbate the pressures meat producers are already feeling, with drought in the U.S. plains accelerating the decline of herds.
For Russian grains, in addition to the challenges of shipping in the Black Sea, some of the country’s biggest wheat exporters have links to state-owned bank VTB Group, which is now under sanctions from the U.S.
Overall, the war is likely to have far-reaching effects, the World Food Programme said.
“The food security impact of the conflict will likely be felt beyond Ukraine’s border, especially on the poorest of the poor,” the Rome-based agency said in a statement.“Interruption to the flow of grain out of the Black Sea region will increase prices and add further fuel to food inflation.”