News / Local
Ukraine war hits global wheat supply
08 Mar 2022 at 03:23hrs | Views
Zimbabweans should brace for higher bread and flour prices triggered by growing global demand for wheat following the closure of ports in Ukraine and disruption to supplies from Russia, the two countries which account for a third of global wheat exports.
Zimbabwean farmers are only able to grow half the nation's wheat requirements of 400,000 tonnes per year, and the rest is imported. Some 50 percent of the country's imported wheat comes from Russia, according to the Grain Millers Association of Zimbabwe.
Russia's invasion of Ukraine has shut off a crucial source of exports and threatens future production of the key food grain.
The Grain Millers Association of Zimbabwe has urged the government to step up imports and boost the country's wheat stocks in anticipation that exporters could soon keep their stocks for domestic consumption, fuelling the biggest supply shock to global grain markets in living memory.
"It's prudent that out of an abundance of caution, we import and build sufficient stocks in order to guarantee local bread flour availability and price stability," said Tafadzwa Musarara, the association's chairman.
Zimbabwe's central bank warned last week that not only bread prices would be impacted but gas and petrol too.
"The current global dynamics, including disturbances in Ukraine, are expected to result in spill-over effects on domestic prices. Such global developments include increases in the international prices of oil, gas, fertiliser and cooking crude oil, products of which Russia and Ukraine are major producers," Reserve Bank of Zimbabwe governor John Mangudya said.
Zimbabweans currently buy bread for an average US$1, while petrol and diesel both cost US$1.51 a litre. Market insiders warn petrol prices could go up as high as US$1.90 for a litre.
It is not only Zimbabwe watching events in Ukraine with growing trepidation, but many poor countries in Africa and Asia who rely on the vast, fertile farmlands of the Black Sea region — known as the "breadbasket of the world."
A prolonged conflict would have a big impact some 2,400 kilometers away in Egypt, the world's largest wheat importer. Millions rely on subsidised bread made from Ukrainian grains to survive, with about a third of people living in poverty.
Egypt's state procurer of wheat, which normally buys heavily from Russia and Ukraine, had to cancel two orders in less than a week: one for overpricing, the other because a lack of companies offered to sell their supplies. Sharp spikes in the cost of wheat globally could severely affect Egypt's ability to keep bread prices at their current subsidised level.
Even before the war threatened to affect wheat supplies in sub-Saharan Africa, people in Kenya were demanding #lowerfoodprices on social media as inflation eroded their spending power. Now, they're bracing for worse.
African countries imported agricultural products worth US$4 billion from Russia in 2020, and about 90 percent was wheat, said Wandile Sihlobo, chief economist for the Agricultural Business Chamber of South Africa.
In Nigeria, flour millers believe a shortage of wheat supplies from Russia would affect the price of products like bread, a common food in Africa's most populous country.
"All of us need to look elsewhere" in the future, said Tope Ogun with Honeywell Flour Mills Plc, one of Nigeria's biggest flour milling companies. "We might not get what we need to, and there is likely going to be an increase in the price."
Nigeria has taken pains to reduce its reliance on Russian grains, with farmers moving to plant more wheat fields to try to meet 70 percent of the country's demand in five years, said Gambo Sale, national secretary of the Wheat Farmers Association of Nigeria.
"We have the land, we have the people, we have the money, we have whatever we can need in Nigeria" to grow wheat, he said. "All we need now is time."
The Zimbabwe Wheat Board last convened a meeting of farmers last week to discuss ways of stepping up production to the 400,000 tonnes required to match consumption.
"The 400,000 tonnes wheat target is realistic and as farmers we are confident of revitalising the wheat industry (back) to where it belongs," said Roy Linfield of the Commercial Farmers Union.
"The potential is there. We only need to utilise effectively the land and the water bodies that we have in the country, otherwise we are on course to achieve agricultural success," added Prince Kuipa from the Zimbabwe Farmers Union.
Deputy agriculture minister Vangelis Haritatos said the country's grain reserve the Grain Marketing Board got deliveries of 208,343 tonnes of wheat in 2021, with 60 percent of it of premium grade. This was a 36 percent growth on the previous year.
While there have not yet been major global disruptions to wheat supplies, prices have surged 55 percent since a week before the invasion amid concerns about what could happen next. If the war is prolonged, countries that rely on affordable wheat exports from Russia and Ukraine could face shortages starting in July, International Grains Council director Arnaud Petit told the Associated Press.
Stocks in major wheat exporters – the European Union, Russia, the United States, Canada, Ukraine, Argentina, Australia and Kazakhstan – are set to fall to a nine-year low of 57 million tonnes by the end of the 2021/22 season, International Grains Council (IGC) data shows.
They now account for just one-fifth of global inventories and, with world consumption expected to total 781 million tonnes, that would feed the world for just 27 days.
If Russia and Ukraine are excluded, other major exporters account for 16 percent of global stocks or enough wheat to feed the world for less than three weeks.
"You need to look at what's available," Dan Basse, president of Chicago-based consultancy AgResource, said of wheat stocks. "If someone has a problem, there is surely not enough supply."
But some observers say the outlook may not be too bleak because of the even spread of wheat production around the world, in contrast to crops such as maize and soybeans, helping mitigate weather risks.
"A situation where the whole world has a crop problem is not something that happens very often (for wheat)," says Andree Defois, head of consultancy Strategie Grains.
Zimbabwean farmers are only able to grow half the nation's wheat requirements of 400,000 tonnes per year, and the rest is imported. Some 50 percent of the country's imported wheat comes from Russia, according to the Grain Millers Association of Zimbabwe.
Russia's invasion of Ukraine has shut off a crucial source of exports and threatens future production of the key food grain.
The Grain Millers Association of Zimbabwe has urged the government to step up imports and boost the country's wheat stocks in anticipation that exporters could soon keep their stocks for domestic consumption, fuelling the biggest supply shock to global grain markets in living memory.
"It's prudent that out of an abundance of caution, we import and build sufficient stocks in order to guarantee local bread flour availability and price stability," said Tafadzwa Musarara, the association's chairman.
Zimbabwe's central bank warned last week that not only bread prices would be impacted but gas and petrol too.
"The current global dynamics, including disturbances in Ukraine, are expected to result in spill-over effects on domestic prices. Such global developments include increases in the international prices of oil, gas, fertiliser and cooking crude oil, products of which Russia and Ukraine are major producers," Reserve Bank of Zimbabwe governor John Mangudya said.
Zimbabweans currently buy bread for an average US$1, while petrol and diesel both cost US$1.51 a litre. Market insiders warn petrol prices could go up as high as US$1.90 for a litre.
It is not only Zimbabwe watching events in Ukraine with growing trepidation, but many poor countries in Africa and Asia who rely on the vast, fertile farmlands of the Black Sea region — known as the "breadbasket of the world."
A prolonged conflict would have a big impact some 2,400 kilometers away in Egypt, the world's largest wheat importer. Millions rely on subsidised bread made from Ukrainian grains to survive, with about a third of people living in poverty.
Egypt's state procurer of wheat, which normally buys heavily from Russia and Ukraine, had to cancel two orders in less than a week: one for overpricing, the other because a lack of companies offered to sell their supplies. Sharp spikes in the cost of wheat globally could severely affect Egypt's ability to keep bread prices at their current subsidised level.
Even before the war threatened to affect wheat supplies in sub-Saharan Africa, people in Kenya were demanding #lowerfoodprices on social media as inflation eroded their spending power. Now, they're bracing for worse.
African countries imported agricultural products worth US$4 billion from Russia in 2020, and about 90 percent was wheat, said Wandile Sihlobo, chief economist for the Agricultural Business Chamber of South Africa.
In Nigeria, flour millers believe a shortage of wheat supplies from Russia would affect the price of products like bread, a common food in Africa's most populous country.
"All of us need to look elsewhere" in the future, said Tope Ogun with Honeywell Flour Mills Plc, one of Nigeria's biggest flour milling companies. "We might not get what we need to, and there is likely going to be an increase in the price."
Nigeria has taken pains to reduce its reliance on Russian grains, with farmers moving to plant more wheat fields to try to meet 70 percent of the country's demand in five years, said Gambo Sale, national secretary of the Wheat Farmers Association of Nigeria.
"We have the land, we have the people, we have the money, we have whatever we can need in Nigeria" to grow wheat, he said. "All we need now is time."
The Zimbabwe Wheat Board last convened a meeting of farmers last week to discuss ways of stepping up production to the 400,000 tonnes required to match consumption.
"The 400,000 tonnes wheat target is realistic and as farmers we are confident of revitalising the wheat industry (back) to where it belongs," said Roy Linfield of the Commercial Farmers Union.
"The potential is there. We only need to utilise effectively the land and the water bodies that we have in the country, otherwise we are on course to achieve agricultural success," added Prince Kuipa from the Zimbabwe Farmers Union.
Deputy agriculture minister Vangelis Haritatos said the country's grain reserve the Grain Marketing Board got deliveries of 208,343 tonnes of wheat in 2021, with 60 percent of it of premium grade. This was a 36 percent growth on the previous year.
While there have not yet been major global disruptions to wheat supplies, prices have surged 55 percent since a week before the invasion amid concerns about what could happen next. If the war is prolonged, countries that rely on affordable wheat exports from Russia and Ukraine could face shortages starting in July, International Grains Council director Arnaud Petit told the Associated Press.
Stocks in major wheat exporters – the European Union, Russia, the United States, Canada, Ukraine, Argentina, Australia and Kazakhstan – are set to fall to a nine-year low of 57 million tonnes by the end of the 2021/22 season, International Grains Council (IGC) data shows.
They now account for just one-fifth of global inventories and, with world consumption expected to total 781 million tonnes, that would feed the world for just 27 days.
If Russia and Ukraine are excluded, other major exporters account for 16 percent of global stocks or enough wheat to feed the world for less than three weeks.
"You need to look at what's available," Dan Basse, president of Chicago-based consultancy AgResource, said of wheat stocks. "If someone has a problem, there is surely not enough supply."
But some observers say the outlook may not be too bleak because of the even spread of wheat production around the world, in contrast to crops such as maize and soybeans, helping mitigate weather risks.
"A situation where the whole world has a crop problem is not something that happens very often (for wheat)," says Andree Defois, head of consultancy Strategie Grains.
Source - (Additional reporting by Reuters and the Associated Press)
