Soaring wheat prices as a result of the Russian invasion of Ukraine will risk food shortages and even famine in the Horn of Africa.
ressure will also be piled on the price of everything from a sliced pan to pasta and ready meals here.
Ukraine is Europe’s biggest wheat exporter. Adding Russia’s own grain exports, which also reach world markets through the Black Sea, means the war now threatens 25pc of global wheat exports.
On global markets – including the biggest in Chicago – contracts to buy wheat for delivery in future months have shot up 40pc in the past week, a record, and a bet by traders that supplies will be significantly lower.
One food industry expert who did not want to be named said food inflation in Ireland is heading for double-digit percentages – close to double the squeeze consumers had been feeling up to now.
A 10pc hike would add 12c to 20c to a sliced pan and the knock-on on higher priced foods would be bigger in real terms.
Professor Edgar Morgenroth, an economist at DCU Business School, said Ukraine supplies a large share of the world’s wheat and it is also high quality and therefore used extensively for flour milling.
Irish consumers will inevitably face higher prices but how much is impossible to guage yet, he said.
“In our case in this country we can probably substitute other grains to some extent and ultimately buy at higher prices.”
For poorer countries already being hit hard by inflation, the situation is potentially far more stark. “Depending on overall global wheat production this year you could potentially see famines.”
The Horn of Africa region, including Ethiopia and Somalia, is particularly vulnerable.
The war means uncertainty around almost every aspect of supplies from Ukraine, as basic as how much wheat can be sown and harvested this year.
Maize and sunflower oil are also affected. Major ports in southern Ukraine are closed, Prof Morgenroth said.
Russian wheat is not subject to sanctions, for now, but on world markets buyers are fearful they could run afoul of financial sanctions, if they strike deals for grain.
Higher cereal prices threaten to drive up the cost of meat reared on animal feeds, such as poultry and pigs, while Russia’s role as a major supplier of fertiliser will be felt right through the food supply.
Fertilizer is not subject to sanctions but Russia’s own government is pressing exporters to cut supplies to put pressure on the outside world.
Roland French, a food sector analyst with Davy Stockbrokers, said the sharp rise in the cost of wheat on its own might have had limited impact on consumer prices but is coming when prices were already high.
Energy prices – for ovens and for transport – can be a bigger cost than wheat for food producers but that fuel cost is also high and rising, he said.
Most food producers won’t be hit immediately by higher wheat prices on financial markets because they’ll have orders in place and big retailers will push a share of the higher costs back on food producers to hold on to consumers.
“There is no escaping we are in an inflationary environment and that is being exacerbated by the war in Ukraine,” he said.
In Ukraine itself the war means logistics and transport links are no longer functioning as they should. If fighting continues, planting of winter wheat won’t be able to happen.
