Finance

Russia invasion fuels fear of American food price hikes

A shopper looks at grocery items
Associated Press/Gene J. Puskar
Grocery prices in the U.S. have risen by 8.6 percent on the year, and Russia’s invasion of Ukraine could cause global food costs to spike even more.

Russia’s invasion of Ukraine is raising fears of a global food shortage that could hike prices for U.S. consumers and spark a humanitarian crisis in the Middle East.  

Ukrainian producers are struggling to grow and export their crops amid the war, and American farmers are warning that they may not be able to meet increased demand because Russia’s invasion has spiked the price of fertilizer and fuel. 

Ukraine is the world’s largest exporter of sunflower oil, the fifth-largest wheat exporter and a top corn exporter. Together, Russia and Ukraine account for 29 percent of global wheat sales and the bulk of wheat imports to Middle Eastern nations.  

Commodity prices have skyrocketed since Russia launched its invasion, with traders worried that Russia’s attacks on Ukrainian infrastructure and takeover of key ports will prevent Ukraine from exporting its crops for an extended period of time. 

If the war rages on and prices remain elevated, the cost of bread, cereal, pizza, pasta and other foods in the U.S. could spike, hitting consumers again after grocery prices rose by 8.6 percent on the year, the largest annual increase in four decades. 

“In the next few months, if Ukrainian farmers aren’t able to get their crops in the ground as we go into the springtime, and we’re looking at an entire year without a quarter of the world’s wheat supply, it’s going to have a significant impact on prices,” said Robb MacKie, president and CEO of the American Bakers Association.  

MacKie added that the surging price of natural gas, the primary fuel used to bake common food products, will also impact costs for American consumers. His trade group is pushing the Biden administration to stave off increased biofuel mandates in an effort to boost the nation’s supply of cooking oil. 

Ukraine in recent days successfully exported relatively small supplies of grain by train for the first time since the conflict began. But with Russia controlling the country’s southern ports, Ukraine remains cut off from the Black Sea, its main trade channel.   

Millions of people in Afghanistan, Lebanon, Iraq, Yemen and other Middle Eastern nations were already struggling with food insecurity before Russia’s invasion disrupted their top grain supplier. Those countries, which are far more reliant on wheat-based food than Western nations, are struggling to access supplies and in some cases cannot afford to pay higher prices. 

“The real impact of the war is going to be on countries that have a huge reliance on trade from the Black Sea and also aren’t wealthy enough to purchase wheat in an elevated market,” said Alex Smith, food and agriculture analyst at the Breakthrough Institute. “Places like Yemen, that’s where the real human consequences are.” 

During a press conference with NATO leaders last week, President Biden warned of “real” food shortages stemming from Russia’s invasion and subsequent Western sanctions imposed on Russia. He announced plans to work with the European Union to alleviate food shortages.   

In a recent opinion piece, Sens. Jerry Moran (R-Kan.) and Sherrod Brown (D-Ohio) called on the Biden administration to purchase U.S. commodities and transfer them to hunger-stricken nations.  

Agricultural groups have cast American farmers as the solution. Lobbying groups representing farmers, bakers and oilseed processors sent a letter to Agriculture Secretary Tom Vilsack last week asking him to allow farmers to plant crops on lands that are currently sitting idle under the federal government’s conservation program.   

“The U.S. should do all it can to feed a growing hungry population now threatened by a likely global production shortfall by reassessing vital productive acres being idled here at home,” the groups wrote.

The White House also sounded an optimistic note on Monday.

“We are a net exporter of many of those food commodities, and farmers respond to price signals. So with the price of food rising, they will be responding by making additional plantings and trying to take advantage of the increased price signals,” Cecilia Rouse, chair of the White House Council of Economic Advisers, told reporters, adding that the U.S. would work to deliver food to struggling nations.

Still, while higher wheat prices are encouraging American farmers to plant more of the grain, they’re limited in their ability to quickly respond to a global shortage.  

Most farmers don’t plant wheat until the fall, and this year’s harvest was plagued by droughts. Farmers who plant in the spring are unsure whether current wheat prices are a mirage, as a quick resolution to the Russia-Ukraine conflict would send prices cratering.  

Meanwhile, farmers are saddled with higher fuel, equipment and fertilizer costs. A recent report from the American Farm Bureau Federation found that production costs are expected to increase by 6 percent this year, making it difficult for many farmers to make a profit.  

The cost of fertilizer, which the study found is expected to rise by 12 percent, is one of the biggest factors. An index tracking the price of nitrogen fertilizer ammonia sold in Tampa, Fla., soared 43 percent on Friday, reaching an all-time high.  

Russia accounts for roughly one-fifth of fertilizer exports and has actively restricted its fertilizer producers from sending products to Western countries. Farmers were already being squeezed by pre-war Western sanctions imposed on Belarus, which is a top supplier of potash, a key ingredient in fertilizer.

The sky-high prices could prompt farmers to use less fertilizer, which would likely lead to smaller harvests, further reducing food supply.  

“Fertilizer has doubled, if not tripled,” said Nicole Berg, a Washington farmer who leads the National Association of Wheat Growers. “In Oregon last year, they were even rationing fertilizer during the planting season … and this is even before the war started.” 

Tags Cecilia Rouse Jerry Moran Joe Biden Sherrod Brown Tom Vilsack

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