The escalation of tensions between Ukraine and Russia, two agricultural heavyweights, is pushing up the prices of grains and cereals, suggesting an even more marked increase in the prices of food on our shelves.
“In the markets, uncertainty has an impact on futures contracts [des denrées agricoles] since the end of November,” says Sylvain Charlebois, director of the agri-food analysis laboratory at Dalhousie University in Nova Scotia.
Futures contracts are firm commitments to deliver commodities — in this case, agricultural commodities — whose prices are fixed in advance. “We can already see that certain foodstuffs have been trading on the rise since the fall, which has repercussions on the cost of products used in food processing,” specifies Mr. Charlebois.
“And in Canada, we do a lot of food processing, so that’s definitely having and will have repercussions. But in fact, the impact could be even greater in other countries, where the consumption of raw products is greater,” adds Mr. Charlebois.
granary
The fears are indeed palpable on the Chicago Stock Exchange, where these futures contracts are traded. On Monday, following the recognition of the independence of separatist territories in Ukraine by Russian President Vladimir Putin, their value jumped by 2%. Since the fall, the price of a bushel of wheat, for example, has tickled peaks that have not been seen for nearly a decade. And for good reason: Ukraine and Russia together account for 29% of world grain exports, nearly 20% of corn production and 80% of sunflower oil exports.
At the end of January, the economist at the Food and Agriculture Organization of the United Nations Monika Tothova summed up the situation as follows to the Russian news agency Tass: “The real impact of the tensions [entre la Russie et l’Ukraine] will depend on the duration of the tensions and their evolution. If there is a deterioration in the overall situation with a significant impact on production, export logistics, etc., the repercussions on world wheat markets will be considerable. »
“Ukraine is the granary of the former USSR,” says agro-economist Nicolas Mesly. As a journalist, he traveled the country in 2013 as part of a series of reports: “It’s a land that is excellent, rich, one of the best in the world, suitable for agriculture. This is what has made Ukraine a major player in the international grain trade. »
As a result, supply difficulties from the Black Sea region – where an increasing number of ships fear to sail because of tensions – “will inevitably create a domino effect on a global scale”, he continues. Demand for grains and cereals from Canada and the United States—the world’s second- and third-largest producers, respectively—is expected to increase.
Ukraine has established itself as a major player in the international grain trade
However, last summer’s droughts in North America caused wheat production in Canada to fall by 38% and that in the United States by 21%. “COVID-19 has tended to be blamed for the resulting rise in food prices, but there are a multitude of coexisting factors currently disrupting the agricultural sector, including issues that fall under the geopolitics, but also climate issues,” explains Sylvain Charlebois.
“For my part, I tend to say that we are in a supercycle”, he summarizes. In agriculture, a “super cycle” refers to a period when the price of commodities evolves outside their normal course. “And if the situation in Ukraine deteriorates, we risk reaching peaks in terms of food prices,” he said.
This phenomenon is all the more particular in that, when prices rise, producers tend to want to produce more. Result: the demand for other products, such as fertilizers, increases and their prices are driven up. In the current context, the question of fertilizers is all the more important as Russia is one of the largest producers and exporters of fertilizers on the planet, underlines Mr. Mesly. “And all of this is coming as fertilizer prices soar in 2021.”