International News

European Food Prices Soar

Author : Bozhou Marine

Update time : 2022-03-19 21:36:37

Since the conflict between Russia and Ukraine, Russia, Ukraine, Belarus and other places have successively issued grain export bans, and global grain prices have been rising. In addition to the sharp increase in the cost of living in Europe, the most affected are the less developed countries (mostly from the Middle East, Africa and Asia) that are highly dependent on food imports. The World Food Programme has warned that 2022 will be a catastrophic year of hunger, with 44 million people teetering on the brink of famine in 38 countries.

  The "granary of the world" has successively banned grain exports

- On March 9, the Ukrainian government announced a ban on the export of staple agricultural products such as wheat and oats, as well as corn and buckwheat;
- On March 12, the Ukrainian government further decided to temporarily ban the export of all types of fertilizers, including nitrogen, phosphorus, potassium fertilizers and compound fertilizers;
- On the same day (12th), Belarus extended the country's grain export ban for 6 months, including exports to the Eurasian Economic Union countries;
The Russian Prime Minister signed an interim decree on the 14th, prohibiting the country from exporting grains such as wheat, rye, barley and corn to the Eurasian Economic Union countries until June 30 this year, and suspending exports of white sugar and raw cane sugar until August 31 this year.

The Black Sea region, where Russia and Ukraine are located, is one of the "granaries of the world". The total wheat exports of the two countries account for about 30% of global wheat exports, and corn exports account for nearly 20%. The closure of the granary has caused major food consuming countries to worry about their own food supply, and they have protectively stopped their own food exports.

- Hungary is banning food exports.
- Argentina and Turkey, one of the world's leading exporters of grains, and Turkey, a major exporter of flour, have also taken steps to tighten controls on local products.
- Moldova has also temporarily halted exports of wheat, corn and sugar from this month.

  Food prices soar, 30+ countries face food shortages

According to a World Bank study, 35 countries in Africa are net food importers and their food security depends on international food supplies and prices. African countries such as Tunisia, Egypt and Morocco are heavily dependent on imports of grains, especially wheat, from Ukraine and Russia. Egypt will import about 13 million tonnes of wheat in 2021, 85% of which will come from Russia and Ukraine.

After the Black Sea granary is closed, they can only choose to import food from the United States, Canada, Australia and other countries, but the supply gap in the Black Sea area obviously cannot be easily filled, and the reduction of food worldwide will also make food prices higher and higher. It is also unbearable for importing countries.

In fact, before the outbreak of the Russian-Ukrainian conflict, the global wheat supply was already tense. Data from the International Grains Council (IGC) show that by the end of the 2021/22 season, wheat ending stocks in the EU, Russia, the United States, Canada, Ukraine, Argentina, Australia and Kazakhstan, the world's major wheat exporters, are expected to be 57 million tons, a record high. The lowest point in nine years. The stagnation in exports has heightened tensions, with wheat futures up 32.6% since Feb. 17. According to Goldman Sachs forecast, corn may reach $ 7.75 a bushel by summer, soybeans may reach $ 17.5, and wheat is expected to reach $ 12.5.

  Europe's cost of living soars, economy slumps

For Europe, the whirlwind center of the Russian-Ukrainian conflict, although it will not face the test of famine like African countries for the time being, its economic crisis is also quite serious. In the past two years, the European economy has been in a downturn due to the new crown epidemic. Coupled with the previous supply chain crisis, the climate crisis and the general increase in energy and food prices caused by the conflict between Russia and Ukraine, the living cost of Europeans has skyrocketed.

According to Reuters, the "Decision Foundation", a British economic think tank, expects that the Russian-Ukrainian conflict will trigger wider inflation in the country, and the real income level of ordinary British households will fall by 4% in the next year. That would be the biggest drop in nearly half a century.

In an exclusive interview with Le Parisien, François Villeroy de Galhau, governor of the Bank of France, also said that the Bank of France expects that France’s economic growth will slow down in 2022 and that inflation will continue to rise. This will largely depend on natural gas and oil price movements.

The BBC also quoted an analysis of economists saying that inflation in major Western economies could rise by nearly 10 percent if supply cuts caused by the Russia-Ukraine conflict continue to push up energy and food prices.

The downturn in the European economy means that most of the spending of Europeans will be used to ensure basic living in the future, and the demand for life-improving products may decrease. Changes in demand can also be seen from the recent European freight rates.

Drewry's Composite World Containers Index fell 3.8% this week to $8,832.23 per 40-foot container, the first time the WCI index has fallen below $9,000 per 40-foot container since July 29, 2021. The Shanghai-Rotterdam FAK rate fell 4% to $12,221 per 40-foot box. The decline in freight rates has a certain relationship with the interruption of production by the epidemic, but the reduction in orders caused by the economic downturn in European countries is also an indisputable fact.

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