Why is the wheat price still relatively low?

Russia invaded Ukraine in February 2022, and while I was looking into the most recent developments on the Russia-Ukraine front, I read Newswise’s report on a new study, ‘Impacts of the Russian invasion of Ukraine on the global wheat market’, by the University of Illinois Urbana-Champaign and Texas Tech University, which focuses particularly on how the Russia-Ukraine war has impacted wheat trade.

Following Russia’s invasion of Ukraine in 2022, we saw an immediate impact on the trade of wheat, with prices soaring 28%.

Within a few months, the price of wheat began to drop, and while significantly lower than during the early phase of the war, the wheat price is still 2% to 3% higher now compared with the pre-war figures.

And while this is not a significant increase, the impact of such an increase remains severe for many developing countries.

Newswise points out that while wheat is grown in 97 countries across the world, countries such as China and India produce wheat primarily for their own consumption.

This means that the pool of countries that export wheat is relatively small, and removing a major player from the equation has a dire impact on poor countries.

This is particularly true for countries in which the cost of living is exorbitant already. Africa, Asia and the Middle East are the world’s biggest importers, and this is also where the majority of the world’s poorest countries are located.

The Black Sea Grain Initiative was established in the early phases of the war to allow for safe passage of Ukrainian grain across the Black Sea, which may account for the drop in wheat prices from its peak at the start of the war.

However, as Farmer’s Weekly previously reported, this deal has now expired, with Russia refusing to renew the agreement. Despite this, the wheat price has not increased significantly, despite the deal having expired in July 2023.

This poses an interesting question: why did the price not increase, considering Ukraine’s important role in the production of wheat? The answer to this question, of course, is that other wheat-exporting countries have increased production, filling the gap left by Ukraine.

While the study doesn’t highlight this point, it does reveal that sanctions do not help in any significant manner. The US and its allies may have sanctioned Russia, but Russia has taken the opportunity to exploit the global demand for wheat and is profiting from this demand at the expense of Ukraine.

Perhaps this is one of the reasons why Russia is adamantly against renewing the Black Sea Grain Initiative.

Other countries are also profiting from this, and it leaves global leaders and decision makers in a difficult position: while many want to support Ukraine, it cannot chastise countries that have exploited the Russia-Ukraine war, because this means further burdening those countries that rely on affordable wheat exports.

I’m not sure what the solution to this problem is, but it would seem that countries are so intertwined that we may just be living in a house of cards, and all it takes is one major event to send it all toppling down

Author : Article written & sourced by Iron Edge Design Digital Marketing Agency The agency employs the latest marketing trends and strategies, cutting-edge technologies, and in-depth market analysis to help businesses reach their maximum potential. Trust Iron Edge Design Digital Marketing Agency for all your digital marketing needs and experience exceptional results!.

Leave a Reply

Your email address will not be published. Required fields are marked *

error: Content is protected !!
×

Hello!

Click one of our contacts below to chat on WhatsApp

× How can I help you?