After expectations that Russia’s attempt to restrict exports from Ukraine will exacerbate shortages and exacerbate the inflation situation, food prices increase once more.
As a result of Russia’s withdrawal from an export pact aimed to safeguard vital supplies from war-torn Ukraine, the prices of wheat and other wholesale foods have risen significantly.
Wheat futures increased by about 6% on Monday, while corn futures increased by more than 2%, reflecting fresh scarcity concerns that have plagued markets since Russia decided to invade its neighbor in February.
Ukraine and Russia contribute to thirty percent of the world’s wheat supply.
In July, the United Nations reached an agreement with the administration of Vladimir Putin to allow exports from Ukraine.
However, Russia declared on Saturday that it will halt its participation in the export pact indefinitely, blaming what it described as a large Ukrainian drone strike on its fleet in Crimea.
Traders speculated that the move would jeopardize the shipment of tens of thousands of tonnes of wheat to Africa and the Middle East.
They added that exports of Ukrainian corn to Europe would also be affected.
Following Russia’s invasion, a boom in commodities prices intensified, due in part to economies recovering from the disruption caused by COVID.
As a result, they have contributed to the problem of global inflation, as the cost of staple items has increased to match rising wholesale costs.
Meat, eggs, and dairy products, for instance, have experienced price increases as a result of soaring animal feed costs.
The loss of Russian energy supplies to Europe, which is reflected in record bills for homes and businesses, has also increased the cost of manufacturing goods.
The contract for December wheat delivery rose to $8.77 per bushel, a two-week high, although significantly lower than the March top of $13 per bushel.
Since the July Agreement, about 10 million tonnes of corn, wheat, sunflower goods, barley, rapeseed, and soy have been exported. Ukraine has accused Russia of using this as a justification for a planned withdrawal from the agreement.
Monday’s departure of sixteen ships via the Black Sea remains on schedule, according to Ukraine.
France replied to Moscow’s action by urging that alternative export options be investigated.
It was suggested that supplies be transported by land through Poland or other friendly nations.
Russ Mould, director of investments at AJ Bell, commented on the market movements: “Wheat prices are increasing on the back of fears that the breadbasket of Europe will be strained, and this simply adds to the inflationary pressures that already present.
“The importance of commodity prices, which had diminished slightly during the summer, has returned to the forefront of the discussion.
“Monetary policymakers on both sides of the Atlantic must walk an increasingly tough tightrope as they attempt to rein in inflation without causing too much economic damage in the process.”
