Some data on the global wheat market and food inflation
- Maize, wheat, and rice prices are 8%, 11%, and 3% higher, respectively, than in January 2021.
- Wheat futures jumped 3% on July 17, when Russia announced that it would not renew the Black Sea Grain Initiative, but remained well below peak levels of the previous year.
- Food inflation price data from February 2023 and May 2023 show inflation higher than 5% in 63.2% of low-income countries, 79.5% of lower-middle-income countries, and 67% of upper-middle-income countries, with many experiencing double-digit inflation.
- 78.9% of high-income countries are experiencing high food price inflation.
- The most-affected countries are in Africa, North America, Latin America, South Asia, Europe, and Central Asia.
Food Security Update | World Bank Response to Rising Food Insecurity
By: World Bank
The impact of Russia’s actions on the wheat market
In this commentary, Evenett and Muendler ran simulations to analyze the impact on wheat prices from different actions Russia might undertake:
- “Even a near-complete Black Sea transport ban on Ukrainian wheat would raise the median importer’s wheat price by 4.2%. But sourcing patterns are such that wheat prices in the Philippines, Indonesia, and Tunisia, for instance, would rise by more than 27%.”
- “If Russia putatively raises export taxes high enough to cut its wheat exports by one-quarter, and farmers across the two hemispheres respond to the intervention within the year, then world wheat imports will drop by about 2 million tonnes in total because competing exporters can only partially replace the lost Russian wheat exports. Under this scenario, the median importing nation pays 5.2% more for wheat.”
- “If Russia goes further and raises export taxes so as to cut its wheat exports in half, then total wheat imports fall by 3.4 million tonnes and the median importer pays 9 percent more for wheat than before the conflict. Bangladesh and Nigeria now face above-median wheat price increases of around 14% and 11%, while the Kremlin collects 55.6% of the Russian wheat industry’s value added in tax revenues.”
Food security in 2023: The Black Sea deal isn’t the only game in town
By: Simon Evenett, Marc Muendler – University Of St Gallen, University of California, San Diego
Russia’s leverage over wheat markets might not be the whole story…
Jayati Ghosh suggests that Russian actions and the war in Ukraine are not the only factors that have led to a global shortage of wheat:
[G]rain futures markets experienced a flurry of activity between April and June 2022. Financial investors, including pension funds, increased their share of long positions in the Paris wheat futures market from 23% in May 2018 to 72% in April 2022. Ten “momentum-driven” hedge funds reportedly earned $1.9 billion by capitalizing on the food-price surge triggered by Russia’s invasion of Ukraine. Instead of preventing or containing such financial maneuvers, regulators in the United States and the European Union allowed them to continue unabated.
Surprisingly, most of Ukraine’s grain exports did not reach the world’s poorest countries. Instead, 81% of the 32.9 million metric tons exported under the BSGI went to high-income and upper-middle-income countries, mostly European countries such as Spain, Italy, and the Netherlands, as well as China and Turkey. Low-income countries received 3% of Ukraine’s grain exports and 9% of its wheat (most to Bangladesh). Given that food-importing African countries received only a fraction of these exports, the fears that the deal’s breakdown would lead to mass starvation across the continent seem vastly exaggerated.
The Myth of Global Grain Shortages
By: Jayati Ghosh – University of Massachusetts Amherst
