Skyrocketing grain prices to worsen global food insecurity, Rabobank warns

Russia’s war over Ukraine will push grain and food prices up for at least a year, Rabobank has warned, with dire outcomes for the world’s hungriest nations.

Rabobank’s report on the Russia-Ukraine war said higher energy prices and disrupted trade would be felt well beyond this year.

Australia and New Zealand food and agribusiness research general manager Stefan Vogel said it would result in a big grain shortage this year and next, which could be exacerbated over the next few months when the northern hemisphere harvest would normally be completed.

He said Ukrainian farmers would struggle to harvest crops this year, ship grain out of ports like Odessa, or grow next year’s crop.

A drone shot of green farmland dotted with brown plots.
Ukraine usually provides about half the wheat bought by the UN World Food Program.(ABC News: Lincoln Rothall)

“Last year, Ukraine exported 70 million tonnes of grain, which is twice the amount that comes out of Australia… but this year it will be a fraction of that,” Mr Vogel said.

“Volumes will be reduced by at least 45 percent and probably more.”

Full impact yet to be felt

Russia could also struggle to sell its grain or transport it out of the country due to the conflict, as bulk handling grain vessels could be reluctant to ferry Russian grain because of the war.

Mr Vogel pointed out that most shipping companies were not covered by insurance.

Man in glasses and suit in an office.
Rabobank’s Stefan Vogel says the true loss of Ukraine’s grain will be felt from July.(Supplied by Rabobank)

Ukraine’s grain harvest would normally occur over summer.

“As the war started in February 2022, Ukraine had already shipped at least half of the season’s volumes,” Mr Vogel said.

“Consequently, the world has not yet felt the full impact of the heavy absence of Ukraine’s supplies.

“However, this is about to change from July onward when Ukraine harvests its next crop.”

Dry conditions in France and Germany

Mr Vogel said global supplies were likely to be tight, as the two grain powerhouses of France and Germany were experiencing dry conditions and drought was still affecting the United States grain belt.

“India is also worried about having enough grain for the domestic market for its population of over one billion people and they have set in place an almost total ban on exports to shore up food supplies,” he said.

“The US government has said the world will need to reduce grain consumption this year but this will be very difficult as consumption has been growing by a year-on-year average of 40 to 45 million tonnes a year.

“Reducing grain consumption this year is a scary picture for the food security of those countries and regions that can only import grain, like Egypt, Syria, the Middle East, Sub-Saharan Africa and parts of Asia.

Mr Vogel said there had already been protests about food-price rises in Iran where it had “quadrupled in price in a matter of days”.

India’s ban puts ‘the world on edge’

India may be the second-largest producer of wheat outside China but, like China, it consumes nearly everything it grows.

With wheat prices soaring, Indian traders began selling on the global market, but a heatwave has knocked back production.

India’s government has responded by banning wheat exports, with some exceptions to the least food-secure countries.

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Tasmania’s XLD commodities managing director Paul Willows said India’s decision to slash exports had the potential to put the entire world on edge.

“The real threat here is government intervention on a scale we haven’t seen since World War II,” Mr Willows said.

“We had the Arab Spring a number of years ago that created some tension between population, food price and politicians.

“The worst thing that can happen is that governments panic and do what India has done and ban exports.

Mr Willows added that while high prices were good for grain growers, they could also have an impact on Australia’s livestock producers, who needed wheat to feed their animals.

“Australian wheat has probably been the cheapest in the world by $ 20-50 per tonne,” he said.

“Prices around the world have jumped since the announcement and we’re doing the same, but the tricky thing is there aren’t many sellers of Australian wheat at the moment.

“As prices rise, it’s going to have a very negative impact on the margins for poultry, eggs and feedlots that also need that wheat.”

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