Wheat prices rose another 6% on a single day recently, approaching highs seen at the start of Russia’s full-scale invasion of Ukraine in February.
The surge in basic food prices, which have gone up over 40% so far this year, is the direct result of sanctions on Russia and the decision by India to institute a ban on exports due to concerns over food security.
The relationship between India and Russia has strengthened since Russia invaded Ukraine. Despite international sanctions on Russia, India has expanded its trade and involvement with the nation. They have often appeared to be in lockstep when it comes to decisions on financial trade and national product import and export.
While India is not a vital wheat exporter in the international food market, the impact of its export ban may prove to be a damaging blow in light of Russian sanctions.
Food prices have continued to soar since the beginning of 2022, part of the inflationary impact plaguing Americans.
#Wheat had a big move today, similar on the chart to corn.
We see the short-term chart turning higher enough to turn the technical higher from the extremely oversold level. #oatt pic.twitter.com/m51oYQEZ3X
— Jeff Peterson (@jeffpeterson01) June 7, 2022
In March, the Bloomberg Green Markets North America Fertilizer Price Index jumped almost 10% due to Russian sanctions, the highest increase on record at that time.
According to Bloomberg’s Green Markets, Russia accounted for almost one-fifth of 2021 fertilizer exports. Russia is also one of the world’s top exporters of essential fertilizer ingredients such as urea, ammonia, and potash, per Argus Media.
According to Bloomberg, the loss of the Russian fertilizer supply due to sanctions is likely to cause severe strain to crop nutrient supply. Before the war, the supply chain was under pressure as European fertilizer producers reduced output due to surging gas prices and rising freight costs.
Recently, Svein Tore Holsether, the CEO of the large fertilizer producer Yara International, told the Wall Street Journal, “We are going to have a food crisis. It’s a question of how large.”
Yara International has since ceased purchasing supplies from Russia.
Holsether told the Wall Street Journal that he was weighing a “moral dilemma” even before official sanctions. He said that eliminating Russian supplies would contribute to food inflation.
Others have also expressed concern about a food shortage resulting from the sanctions on Russian supplies.
“Replacing their volumes would take nearly half a decade at the very best, and in some cases prove nearly impossible as Russia is a large source of mineral deposits found in few other global locations,” said Alexis Maxwell, an analyst for Bloomberg’s Green Markets.