News & Events

How the Ukraine Wheat Shortage Affects the U.S. Food Supply

Jun 22, 2022 2:15:00 PM / by FreshByte Software

Russia’s invasion of Ukraine, fighting that involves two countries that account for nearly 30 percent of the world’s wheat exports, has sparked food supply concerns around the globe with fears of grain shortages and escalating prices.

Ukraine, which has been called the breadbasket of Europe because of its key agricultural exports, reported in May that the country’s grain exports were down 64 percent year-over-year.

Wheat plays a huge role in the global food chain with the global trade of wheat greater than all other crops combined. Ukraine, according to the United Nations, accounted for 10 percent of global wheat exports while Russia produced about 17 percent of wheat globally.

The U.S. produces most of its wheat domestically, so Americans should not face grain shortages that will be especially acute for countries in regions such as North Africa and the Middle East, which rely on Ukrainian and Russian wheat.

The U.S. food supply, however, is not immune to the global shockwaves in the wheat market with the USDA reporting in May that the price of wheat has almost doubled in the last 12 months, rising $4.16 per bushel to $10.20. Feed grain prices for farmers were up 33 percent.

Global Wheat Supplies Were Already Under Pressure

Even before Russian forces rolled into Ukraine on Feb. 24, global wheat supplies were under pressure from extreme weather, with prices up 16 percent in the first six weeks of 2022.

“Wheat prices were already on the rise before the war in Ukraine as a result of droughts in the West and Canada,” Chad Hart, an agricultural economist at Iowa State University, told The USA Today. “Then you put the war on top of that, and that sort of is an accelerant to what we’ve seen in terms of prices.”

A report from the World Bank says that “Russia’s invasion has contributed to an historic shock to commodity markets that will keep global prices high through the end of 2024.”

The reported forecasted that by the end of 2022:

  • Food prices will soar by 22.9 percent
  • Wheat prices will spike 40 percent

The news is not expected to get better with what wheat Ukrainian farmers are able to harvest this year, not finding an export outlet as Russian has blockaded the Black Sea shipping routes.

Russia is also a major exporter of the world’s fertilizer supply and trading restrictions with the country since the outbreak of the war have led to escalating fertilizer prices for farmers in the U.S. and across the globe.

More Bad News for the World’s Wheat Markets

Compounding the world’s wheat situation was India’s decision to ban exports in May after unusually hot weather hurt wheat crops.

India, the world’s second largest wheat producer, exports very little wheat, but the export ban sent off alarm bells.

"If everyone starts to impose export restrictions... that would worsen the crisis," the BBC reported that German Food and Agriculture Minister Cem Ozdemir said after the ban was announced in May.

Gro Intelligence’s Kelly Goughary said that India’s ban led to a price surge because buyers were hoping to rely on supplies from India to make up for the lack of exports coming from Ukraine and Russia.

Other major wheat producers such as Canada, France, and the United States, are facing pressure from droughts, heat waves and floods.

And China, the world’s largest producer of wheat, said in March that its winter crop could be the “worst in history:” because of heavy rains last year.

The bottom line, according to the USDA’s “World Agricultural Supply and Demand Estimates in May”:

  • Global wheat production for 2022-23 period will be the lowest in four years
  • Global wheat stocks will be at their lowest in six years

Gro Intelligence estimates that global wheat stocks could plummet to their lowest levels since the 2007 and 2008 financial and commodity crisis.

“The Russia-Ukraine war did not start the food security crisis. It simply added fuel to a fire that was long burning,” Gro Intelligence CEO Sara Menker told the United Nations Security Council.

Can U.S. Farmers Help with the World Wheat Shortfall?

There is hope that the U.S. farmer can step up to the challenge and help make up for the world’s wheat shortfall but there are many hurdles to making that a reality.

Three main problems with the U.S. ramping up wheat production are:

  • The cyclical nature of farming and growing seasons with planting decisions being made many months in advance so any response to a crisis is slow in developing.
  • Federal incentives for double-cropping – planting two different crops in the same field during a single year – are not widely available in areas with the highest wheat production
  • Volatile wheat market, with wild price swings, makes some farmers hesitant about shifting about shifting to the crop

"It's not like in the U.S. we have all these unplanted acres, fields just lying fallow," Veronica Nigh, senior economist with the American Farm Bureau Federation, which lobbies on behalf of farmers, told The USA Today.  "That's frustrating. Farmers want to do more. They want to be able to help to respond."

Weather in the U.S. is also playing a factor with three of the country’s largest wheat-producing states – Kansas, Oklahoma, and Texas, all in drought condition leading to very poor to fair growing conditions with forecasts for below-average yields.

Chandler Goule, CEO of the National Association of Wheat Growers, told The USA Today that if there were an increase in wheat production it would come from the upcoming winter harvest, but cautioned, "You're not going to see a 10 percent, 15 percent, 20 percent increase."

So, expect breakfast cereals and other bakery products – which were up 11.6 percent in May, outpacing the general inflation at 8.6 percent – to keep going up in price at your local supermarket.

Tags: Traceability, Inflation

FreshByte Software

Written by FreshByte Software

Created with our customer's needs in mind, Fresh Byte Software provides an inventory and accounting management system built to increase gross profits and minimize costs for wholesalers, distributors, and manufacturers. Are you shopping for new software that will help you manage your business? Contact us today, we have the solution for you.