Bread may be the defining invention of the human race. Or at least, bread and beer. Both allowed calories that were difficult to carry and unpleasant to consume, to be totted around in far more agreeable forms; forms that would, best of all, allow for some degree of extended storage.
One result of Vladimir Putin’s invasion of Ukraine is simply this: Bread is going to cost more, everywhere in the world.
Everything is going to cost more, to one degree or another. That’s because Putin’s war has driven up the cost of energy, and energy underlies every product mined, grown, or manufactured. But energy is only a fraction of the cost of most goods. A 10% rise in the cost of power doesn’t directly translate into a 10% higher price for socks … unless the sock maker is just looking for an excuse.
The effect that this war is going to have on food, and on wheat in particular, is something else. Over the last decade, the top exporters of wheat have been Russia, the United States, Canada, France, and Ukraine, with Australia close behind. Right now, Russian wheat is locked up behind a still growing wall of global sanctions. Ukrainian wheat — whether it was a winter crop that should be harvested in coming months, or a spring crop preparing to go in the ground — is being ignored by farmers who are more concerned about the shells flying over their homes, and the tanks being left mired along their roads. Two out of the top five producers of wheat are essentially off line, and can be expected to remain for at least this year.
Just as there are large exporters of wheat, there are large importers. Egypt and Turkey together take in more than the U.S. exports in total, and they’re just two out of dozens of countries that import wheat in large quantity. Even for those nations, like the U.S., that don’t import wheat from elsewhere, wheat is a commodity. A shortage in supply anywhere in the world, generates an increase in prices everywhere in the world. Right now prices are up over 80%, and the market is best described as “in chaos.” Unlike the loss represented by Russian oil, this gap cannot be easily closed.
At the very minimum, the world is going to face a significant increase in the price of many different foods over the coming months. It’s not unreasonable to believe that there could be such a shortage of wheat on the international market that triggers famine in nations around the world. Or that the resulting famines could fuel a wave of unrest.
If some hole needs to be knocked through the barriers being raised around Russia, it’s not the sale of oil that needs to be considered. It’s the sale of wheat.
Thursday, Mar 10, 2022 · 9:16:26 PM +00:00 · Mark Sumner
Earlier today, the Chinese foreign minister described what was happening in Ukraine as a “war,” the first time China has used that word. Now Reuters is reporting that China is refusing to step in to help Russia with a major problem.
China has refused to supply Russian airlines with aircraft parts, an official at Russia's aviation authority was quoted by Russian news agencies as saying on Thursday, after Boeing and Airbus halted supply of components.
These represents some significant cracks in the Russia-China partnership. Maybe Xi is not so pleased with how Putin’s war is going. If China was looking for proof that it was still possible to wage a war of acquisition, they didn’t get the demonstration they were after.
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