Wheat prices have exhibited an upward trend in global markets, shortly after Russia’s withdrawal from an agreement that ensured safe transportation of cereals through the Black Sea. This development has sparked concerns about its impact on both grain-importing countries, particularly those in poverty, and western nations grappling with persistently high inflation.
Following the termination of the UN-brokered Black Sea grain initiative between Russia and Ukraine, Russia launched heavy airstrikes on Ukraine’s grain reserves and port infrastructure in Odesa, a coastal city. The initiative aimed to address the food crisis caused by Russia’s blockade of Ukrainian ports, which hindered the transport of vital cereals.
Under the agreement, grain prices had declined by 35%. However, wheat prices surged nearly 1.5% on the Chicago Board of Trade exchange, while corn and soybean prices also experienced an increase. Wheat prices saw a rise of over 8% on Wednesday.
This escalation in wheat prices has been mirrored by the upward trajectory of other agricultural commodities like rapeseed and sugar worldwide.
Ukraine, a major producer of grains and oilseeds, was previously the fifth-largest exporter of wheat globally. Russia, too, is a significant wheat exporter.
Notably, Moscow has issued a warning, stating that it would regard all ships sailing in the Black Sea region towards Ukrainian ports as potential military targets.
European Union’s foreign policy chief accused Russia of instigating a global food supply crisis. Josep Borrell highlighted the profound repercussions, emphasizing the emergence of a substantial food crisis worldwide. The UN secretary general, António Guterres, has previously expressed concerns that hundreds of millions of people would face hunger as a result of the situation.
Prior to the suspension of the grain deal, wheat prices had already fallen by around 14% since January, while corn prices had dropped by over 20%.
These developments have raised apprehensions about the possibility of a surge in prices for essential ingredients, coinciding with the recent alleviation of food inflation in the UK and other western nations.
Susannah Streeter, the head of money and markets at Hargreaves Lansdown, expressed disappointment over the impact on western shoppers facing rising prices but underscored the treacherous consequences for regions grappling with severe drought, particularly the horn of Africa, where millions of people are at risk of acute food insecurity and famine.
Market analysts have also drawn attention to the adverse effects of extreme heat and insufficient rainfall on other vital growing regions such as the US. Forecasts for the US wheat harvest have been downgraded, with stocks projected to reach a 16-year low.
Streeter highlighted the confluence of these unfavorable factors, which have propelled US wheat futures prices up by more than 13% since Tuesday and heightened concerns about persistently high food prices.
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