Pasta, bread and pizza risk becoming more … salty. Threatening our shopping cart is now also the possibility of Russia invading Ukraine. If war really does break out, they will whirl up prices of cereals – wheat, corn and soy – but also cooking oils that have already risen. In short, a real sting for consumers which, for Italians adepts by definition to the Mediterranean diet, would even translate into a nightmare.
In fact, analysts fear that the tense situation on the Ukrainian front will give a severe blow to exports, primarily wheat, and therefore to prices. This is because second United States Department of Agriculture (USDA) estimatesRussia is the largest wheat exporter in the world, followed in fourth place by Ukraine: the two countries are responsible for 29% of global wheat trade, nearly 20% of corn exports and 80% of exports of sunflower oil.
The climate of tension, in truth, has already contributed to raising prices: a loaf of bread already costs a few cents more, and soon the price would rise (it should be said) again. Add to this the cost of rising energy prices: most of the price of a loaf of bread is in fact linked to the costs of production, packaging and transport and whether oil goes upit goes without saying that even the loaf of bread will cost the consumer more.
The same goes for pasta and flour, and more. This is true of corn, of which Ukraine is a major exporter, in fact it ranks fourth among exporters and accounts for about 22% of trade.
Moreover, the increase in corn prices affects soybean prices because they both concern the same cultivated land. And, geopolitical tensions aside, soybean supplies are shrinking rapidly due to the drought in South America. This would lead to higher prices, which in turn would affect many packaged foods, which contain corn and soybean oils.
The latest developments on the Ukrainian front have already made themselves felt: Corn prices for March delivery have increased in recent days by nearly 3% and wheat by nearly 6%. According to some estimates, the pandemic had already thought about increasing food costs: only in the United States, according to the Department of Agriculture, have they recorded a rise between 2 and 3% this year.
Wheat, corn and soybeans saw prices reach top levels last year, with wheat and soybeans reaching their highest prices since 2012 and corn at their highest since 2013. And the race does not seem to be slowing down. accelerating due to the winds of war coming from the East. Wheat futures have already risen by almost 4% this year, corn futures have gained more than 10% and soybean futures more than 17% .
For analysts, “uncertain times” await us, also because the commodity market is usually much less volatile than stocks or oil, and is often subject to spectacular peaks and falls. As Gautier Le Molgat, an analyst at Agritel, states, “the market does not know the nuances: either it is war and rises, or it is peace and falls”. And if consumers of bread and pizza do not sleep peacefully, consumers of sunflower oil are also not happy: Ukraine is the first exporter followed by Russia in second place. But there is a worst-case scenario to consider when it comes to commodity trading: if a conflict breaks out and Russia blocks the Odessa port, Ukraine would have problems exporting.
Not to mention the fact that in the event of sanctions, the United States could decide to ban the Russian grain trade in dollars. And besides Ukraine and Russia, the countries most affected would be their biggest customers, namely Egypt, Turkey, Indonesia and Morocco, who would be forced to find wheat elsewhere, probably at a higher price.
And on the supply side, the European Union, the United States and Australia, the other major players in terms of grain, would be the main beneficiaries of the situation. But even this aspect could actually only be on paper, because weather conditions are not taken into account: the North American wheat harvest has been hampered in recent months by drought.
However, it is difficult to make precise forecasts given the exceptional uncertainty and volatility of agricultural markets which, however, also represents an enormous attraction for investors. Of course, a diplomatic end to the crisis or a continuation of the status quo in Ukraine would relieve the market but prices could remain high. Wheat and corn are currently 22% and 18% above their prices respectively at this time of last year. The next US wheat crop is threatened by a drought on the southern plains, while corn crops are expected to suffer from lack of rain in Argentina and Brazil.
As for wheat, the data from Italmopa, the Italian Millers’ Industrial Association, give a clear picture of the situation: first of all, we need to distinguish between soft wheat and durum wheat. The first is mainly intended for the bread-making sector, the second for the pasta sector: a market niche equal to 5% of the entire commercial flow linked to wheat, concentrated mostly in Italy and the Mediterranean basin. The remaining 95% is made by soft wheat.
The international production of the latter is around 750 million tons (Mt), compared to just over 30 Mt for durum wheat. In the European Union, France and Germany, with average productions around 36 Mt and 22 Mt respectively, are the major producers of soft products, while among the extra-European countries the productions of Russia (on average around 75 Mt) and the United States should be noted ( 50 Mt, always on average), Canada (30 Mt), Ukraine (27 Mt) and Australia (25 Mt).
Italy produces about 65% of the wheat necessary to cover the needs of the processing industry. So the remaining 30-35% is covered by imports, which are not an alternative but a necessary measure to bridge the gap between domestic supply and demand. Sometimes we also import because the quality of the foreign wheat is superior to that of the Italian product. The production of Italian soft wheat is about 3.0 Mt compared to an industrial requirement of about 5.5 Mt.
As with durum wheat, a part – between 10 and 15% – of the production is not destined for the milling industry, and therefore for the production of flour, but for other uses such as the production of seeds and animal feed in primis. Importing is therefore a necessity. For this reason, when the goods are in short supply, the price goes up. With the pandemic, a rush to supply had already occurred when the price was still at 277 euros per ton for domestic wheat and 293 euros for foreign wheat.
Today, when wheat is in short supply, those stocks are worth much more: exactly + 86% compared to the average price of 2020 for the national, and + 108% for imported non-European wheat. And if we think only of Italy, wheat has become a real primary good: in 2020, thanks to the pandemic, 17 million tons of pasta were consumed all over the world, i.e. double 10 years ago.
And Italy is no exception: 23 kg per capita are consumed every year. It is therefore impossible to pass under your nose the passage of the price of a half-kilo packet of pasta which, according to the estimates of consumer associations, has gone from 0.59 euros to 0.79 euros.