The war in Ukraine will continue to push up food prices as the supply from the Breadbasket of Europe is cut in the short term and possibly in the long term.
How the war in Ukraine will affect food prices.
Even before the Russian army crossed into Ukraine, food prices had been on the rise for the past year. But the world has seen large jumps in the cost of food over the last two months. Globally , food is 20% more expensive now than it was a year ago, with prices rising 4% since January this year. A variety of factors have caused these price increases, including rising transportation costs, supply chain disruptions and rising commodity prices, such as corn and wheat. The war in Ukraine will contribute to push up food prices as the supply from the Breadbasket of Europe is cut in the short term and possibly, the long term depending on how the conflict plays out
Domestic and international impacts
Higher wheat prices will translate into higher food prices for all. But the impact will depend on the farmer share of their food dollar, and the percentage of an individual's income spent on food. There is a strong correlation between wheat price and bread price in developing countries, where the farmer share of food can be close to 50%. Wheat price increases will have a significant impact on the price paid for wheat based products. The financial consequences for those consumers will be large given the relatively high percentage of income spent on food.
The Compounding factor if energy in prices.
The Russian invasion of Ukraine has also shocked energy markets. Russia produces 23% of the world's natural gas and about 40% of the European's Union natural gas and about 40% of the European natural gas comes from Russia. Russia is also a major exporter of oil. Sanderis have helped push up crude oil prices by more than 60% since the beginning of the year. The increase in energy prices is the major driver of food inflation.
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