Russia’s invasion of Ukraine: How does it affect food prices?

After heightening the geopolitical tension resulting from the invasion of Russia to UkraineUP Administration professor and researcher Angie Higuchi explains that food insecurity will intensify globally.

Higuchi points out that when the productive work of Ukraine and Russia, the main actors in the food marketing business, pauses, inflation – already high in recent months – will skyrocket.

The importance of Ukraine and Russia

The teacher remembers that Ukraine is a major food exporter having more than 70% of its agricultural landwhile Russia is a relevant producer of fuels: the second largest exporter of oil and the largest exporter of natural gas in the world; Added to the fact that it is the main exporter of wheat, and together with the country where it deployed its troops, they cover about 29% of the world export market for this cereal.

In addition, he notes that Ukraine is classified as the pantry of Europe by providing grains for cattle, pigs and poultry for the European Union, the Middle East, Africa and even China.

Consequences

With the geopolitical crisis, Ukrainian crops and harvests will deteriorate and the supply chain will be cut, resulting in severe food insecurity in several regions. Higuchi notes that prices, according to various studies, could double in the face of shortages and inflation inherited from the pandemic.

It even emphasizes that during this year food prices would rise up to four times due to logistics costs, lack of labor, interruption in production and transportation problems – boosted by the displacement of civilians in Ukraine -, as well as the increase in shipping and freight prices and the high prices of up to 80% in fertilizers.

“Let’s not forget that Russia is responsible for 13% of world trade in fertilizers, the world’s fourth largest producer of urea, sixth of diammonium phosphate and third largest producer of potash fertilizers,” he sums up.

In this sense, Higuchi concludes that the cut in the supply chain will bring about an increase in the prices of nutrients, thus hitting the productivity of crops and aggravating food inflation.

Finally, he warns that as bans from Russia apply to agricultural imports such as fruits, some meats and prepared food products, Ukrainians will pay higher costs. This scenario would fuel an eventual food shortage and with it, global prices would also increase.

“The blow to the pockets of consumers globally will be severe as a result of this new crisis added to COVID-19. And we Peruvians will not be the exception”, he concludes.