Why Russia-Ukraine conflict threatens global breakfast table

It’s been just fourteen days since Russia invaded Ukraine and prices of wheat – a key staple in the breakfast table – has climbed to unprecedented heights as the crisis disrupts global food supplies.

Data from the International Grain Council shows that a metric ton of US HRW wheat specie was sold for $436 on February 24th when Russia invaded Ukraine and surged to $536 per ton on March 7th, indicating a 22 percent high in 13 days.

The crisis is already threatening to take foods out of the tables of citizens of countries who heavily rely on the Black Sea region for the grain and other food calories.

“The conflict in Ukraine could limit the world’s supply of staple crops like wheat, maize, and sunflower oil, resulting in the skyrocketing of food prices and hunger,” said Gilbert Houngbo, the president of IFAD in a statement.

He stated that the crisis could jeopardise global food security and heighten geopolitical tensions.

“Forty percent of wheat and corn exports from Ukraine go to the Middle East and Africa, which are already grappling with hunger issues, and where further food shortages or price increases could stoke social unrest,” he said.

“The continuation of this conflict, already a tragedy for those directly involved, will be catastrophic for the entire world, and particularly those that are already struggling to feed their families.”

The world is currently facing a huge supply shock as the crisis cuts off shipments from the Black Sea region that accounts for a quarter of global wheat trade and at least 12 percent of food calories traded.

The Black Sea region which includes Russia and Ukraine plays a major role in the global food system. Ukraine alone is home to 25percent of the world’s most fertile soils for agriculture.

Read also: Russia-Ukraine crisis and the rest of us

According to the United States Department of Commerce, Ukraine’s agricultural strength is partly linked to its fertile black soil, with 25percent of the world’s reserves on its land.

This fertile land is behind Ukraine’s grain strength, helping it to become one of the world’s largest exporters of wheat and maize, as well as the world’s largest exporter of sunflower oil, which is the fourth most-consumed vegetable oil in the world.

The main destinations of Ukrainian wheat in 2019 were Egypt ($3.65billion worth), Indonesia ($664.5illion), Bangladesh ($418.6million), Turkey ($207.4million) and Tunisia ($195.5million), according to data from the UN’s Comtrade. In 2020, Lebanon imported a total of $148.49m worth of wheat. Of that, $119.1m came from Ukraine and $22.9m from Russia.

The effect of the crisis will be felt on the prices of bread and other wheat derivatives globally as well as maize.

Similarly, the Russian invasion has disrupted Ukraine’s farming industry. Ports have been shuttered since war erupted, making it difficult to export commodities via the seaports.

“Wheat is a major raw material for the production of flour which is used for bread and some other confectionaries. Therefore, the current development is going to disrupt the supply of wheat in the global market,” said Muda Yusuf, chief executive of Centre for the Promotion of Private Enterprise (CPPE).

“There is, therefore, a risk of a hike in the cost of wheat which will affect the price of flour and a knock-on effect on the price of bread and other confectioneries,” he said.

Situation in Nigeria

Data from the National Bureau of Statistics (NBS) shows that Nigeria imported N898.2 billion worth of wheat in nine months that ended September 2021.

The top origins of wheat into Nigeria in 2021 included the USA, N194.2 billion; Canada, N136.4 billion, Russia, N124 billion, Lithuania, N122.3 billion and Latvia, N115.9 billion.

In 2020, Nigeria’s total wheat imports amounted to N756.9 billion of which N186 billion was sourced from the United States; N144 billion from Russia; N132.3 billion from Canada; N110.6 billion from Lithuania, and N101.9 billion from Latvia.

In 2019, N349 billion worth of wheat was imported into the country of which N127.7 billion came from the United States; N73.5 billion from Canada; N35.9 billion from Russia; N32.3 billion from Latvia, as well as N30.7 billion from Argentina.

The ripple effect will be faced by Nigerian firms operating in the food industry that are currently facing an uptick in production costs from exchange range volatility amid Covid-19 induced supply chain disruptions.

In the last twelve months, wheat-based products such as the popular pre-packed wheat flour and bread (sliced and unsliced) have witnessed a steady price increase across the country.

In January 2022, a 500g sliced bread was sold for N418.65, representing 28 percent increase on a year-on-year basis. The 500g unsliced bread rose by 25 percent from N306.74 in January 2021 to N383.51 in January 2022, NBS data stated.

Wheat flour pre-packaged golden penny 2kg which was sold for N757.97 as of January 2021 rose by 29 percent to N974.87 in January 2022.

“Prices of bread and other wheat derivatives will surge again and this means more pain for poor Nigerians who are currently struggling to feed,” said AfricanFarmer Mogaji, chief executive, X-Ray Consulting.