Brace yourselves, global food prices are about to get a lot higher.
Ukraine on Wednesday announced an export ban on various agricultural products, including wheat, oats, millet, buckwheat, sugar, salt, meat, and live cattle, in an urgent effort to preserve the country’s much needed food supply. According to Ukraine’s minister of agrarian and food policy Roman Leshchenko, as cited by the Associated Press, Russia’s military intervention has left many of the country’s citizens on the brink of starvation, and the de facto export ban was enacted in order to avert a “humanitarian crisis,” balance local markets, and “meet the needs of the population in critical food products.”
With Ukraine being the breadbasket of Europe, the export ban will further inflate runaway global food prices, and disproportionately affect vulnerable populations and marginalized countries, such as Lebanon, Syria, and Africa. According to the UN’s Food and Agriculture Organization (FAO), global food commodity prices were up 20.7% in February compared to the same period one year ago, led sharp increases in vegetable oils, cereals, and dairy.
The FAO listed Russia as the largest exporter of wheat in 2020, with Ukraine sitting at the fifth largest. Combined, the two adversary countries accounted for 28% of global wheat exports in March of last year, as per Goldman Sachs analysis.
Commenting on Ukraine’s grain export ban, Teucrium CEO Sal Gilbertie said that impact will likely not cause a substantial shortage in the global wheat supply, but will send food-staple commodities soaring— which in turn is typically followed by social unrest. “Remember, bread riots are what started the Arab Spring, bread riots are what started the French Revolution,” he explained. “It is a biblical event when you run low on wheat stocks. You won’t see a global food shortage. Unfortunately, what you’re going to see globally is that billions of people might not be able to afford to buy the food.”
Information for this briefing was found via the Government of Ukraine, the Associated Press, FAO, Goldman Sachs, and Yahoo Finance. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.