Ukraine and Russia together supply a quarter of world wheat exports. With the war in Ukraine, many countries includingurkey and Egypt are likely to bear the full brunt of soaring cereal prices. The majority of their wheat imports come from Russia and Ukraine.
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Turkey dependent on Ukrainian and Russian wheat
While firmly denouncing the attack on Ukraine, Turkey refuses to join Western sanctions to preserve its relations with Russia and in particular its economic interests. But the conflict will have effects on the Turkish economy, which is already in bad shape. The country is particularly worried about its wheat needs.
According to figures from the Ministry of Agriculture, in 2020-2021, 78% of Turkish wheat imports came from Russia, and 9% from Ukraine. These are its biggest suppliers. According to Murat Kapikiran, president of the Istanbul Chamber of Agricultural Engineers, Turkey has locked itself in recent years in dependence on these two countries. “Four years ago, Turkey produced 107% of its wheat needs”, he recalls. “But in recent years, our imports have increased enormously, reaching almost 10 million tonnes in 2020. This is the result of erratic agricultural policies that have caused production to plunge: lack of support for farmers, imposition of ceiling prices , reallocation of agricultural land for real estate, industry etc.”
“Our current production barely covers 80% of our needs! We have become dependent on Russia and Ukraine. And now the crisis will worsen.”
Murat Kapirikan, Chairman of the Istanbul Chamber of Agricultural Engineers
The war is likely to cost Turkish consumers dearly, who must expect an increase in the price of their bread, flour or pasta. Especially since imports from Turkey will increase further since last year, due to severe droughts, local wheat production fell by 14%. The government assures that there will be no shortage, but professionals say that the rise in prices is inevitable. But Turkey is already experiencing record inflation: consumer prices jumped 49% year on year in January, unheard of for 20 years.
President Erdogan, whose approval ratings plummet as prices rise, has promised a return to single-digit inflation in 2023, the year of legislative and presidential elections. But with rising prices for energy and other agricultural products – barley, sunflower etc. – that the war in Ukraine will entail, the bet seems more complicated than ever.
Egypt, the world’s largest wheat importer
Egypt is the most populous country in the Arab world, with over 100 million people. It is also the world’s largest buyer of wheat, highly dependent on its imports from Ukraine and Russia. As early as last week, the Egyptian Prime Minister gathered his government to discuss the economic repercussions of the war in Ukraine. And more particularly this question of wheat.
Egypt consumes about 18 million tons of wheat per year, 13 of which are imported. 80% of these 13 million tonnes of wheat come from Ukraine and Russia. (30% for Ukraine, 50% for Russia.) That is to say the dependence of Egypt vis-à-vis these two countries. And the risks that therefore weigh on the supply.
On Saturday, a very last Egyptian cargo ship was able to leave the Ukrainian port of Youzhne on the Black Sea, near the city of Odessa. On board, 60,000 tons of wheat. That’s only a fifth of an order that should have been delivered by March 3. The Egyptian Prime Minister, however, seeks to reassure. According to the government, current stocks can last four months. If we add the local harvest which will begin in the spring: in all, Egypt has wheat for nine months. That is, more or less until the end of the year.
But will soaring wheat prices in the markets be felt by Egyptian citizens? This is the difficulty facing the Egyptian government. How can the impact on the population of these prices which are reaching peaks be minimized?
Already in January, the price of an order of Russian wheat due to arrive in mid-March was more than double the price forecast in the state budget. Since the outbreak of the Russian invasion, Egypt has sought to diversify its suppliers. But prices are still higher than they were in January. This is also why Egypt has again rejected an offer of French wheat this week. Too expensive.
This surge in wheat prices impacts those of flour and therefore of bread. Two staple foods that the Egyptian authorities keep at a low price through a subsidy system. Nearly 70% of Egyptians benefit from it. But the government had warned in mid-February: the price of subsidized bread will increase. This could be done by reassessing the levels of allocation so as to protect the poorest. Because touching bread is risking discontent, or even more. The authorities know it. In a country where at least 30% of the population lives below the poverty line.