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Our Daily Bread: Uncertainty in Global Wheat Markets

Food Security, Food Trade

Our Daily Bread: Uncertainty in Global Wheat Markets

The Dirt

The world needs wheat for bread, a daily fixture in households across the globe. As significant exporters of this "staple of life", Russia's war on Ukraine affects the world’s wheat supply, threatening global food security. Which countries, if any, can step up to fill in the gap...and at what price?

A year ago, the world held its breath as Russian troops poured across the Ukraine border and sent global energy and commodity markets into a panicked spiral. Food security for millions seemed at greater risk than ever before, as vital exports of wheat, corn and oilseeds from Ukraine and Russia through the Black Sea corridor simply ceased.

What’s in store for wheat now?

But today, the picture seems to have changed. The Russian onslaught has been stymied if not totally repelled. Exports from the area have resumed, and energy and commodity markets have calmed a bit and retreated from record-high levels. Crop production in Russia has rebounded, and Ukraine producers have proven to be remarkably resilient in the face of continuing battle and devastation in important eastern agricultural regions.

ukraine war, Our Daily Bread: Uncertainty in Global Wheat MarketsSo why are so many people still holding their breath about the ongoing conflict, and its potential threat to food security? The answer is simple.

Despite the signs of hope that have emerged over the past year, the list of potential threats remains substantial, each with dire consequences.

Solving all the remaining threats is a Rubik’s Cube of agronomic, economic, political and other decisions and actions involving the entire global community.

The complexity of the challenge can be seen in the open issues facing just one segment of the global agricultural system: wheat.

(Want to learn a little more about wheat before you dive in? Read this.)

What’s so important about wheat?

Wheat is the source of bread. Virtually every citizen of western society knows the simple common prayer at the heart of western religion and the social contract that makes civilization possible: Give us today our daily bread.

Six simple words express the essential role of wheat in the food security we require in our daily lives. The bread that wheat makes possible is one of our oldest foods – with evidence of a primitive form produced more than 17,000 years ago. Scientists tell us that bread became a dietary staple during the Neolithic era, 10,000 years ago.  The wheat we recognize today originated in the Tigris and Euphrates rivers, whose headwaters begin the mountains south of the Black Sea in today’s headlines.

Wheat is a cornerstone agricultural commodity. Flour is used to bake breads, cakes, pizza, tortillas, pasta, pastries and more – all the elements of the “daily bread” of human existence.

The word ‘bread’ – in all its linguistic variations – is a common and easily recognized element of virtually every language on earth. 

Pain, brot, xleb, roti, nan, akara, mkata… all mean bread, and all are part of the foundational vocabulary in their respective linguistic training.

Bread remains something all of us both need and want in our lives, every day. It drives a relentless demand for wheat – a basic human need common to the entire western world.

Ukraine and wheat

This apparently incessant increase in demand for wheat may be one of the largest reasons for worry that persists about the Ukraine conflict.

Over the past year, the world has been told over and over again just how important Ukraine has become as a major supplier of grains and oilseeds to the global marketplace.

ukraine war, Our Daily Bread: Uncertainty in Global Wheat MarketsNews of the courage and resiliency of the Ukraine producer and the entire national agricultural sector has been inspirational.

But the fact remains that the Ukraine agricultural sector’s rebound has been built on a pivot to greater emphasis on export of corn and oilseeds specifically sunflowers, more than wheat.

Regardless, Ukraine is still the 5th largest exporter of wheat, just behind the United States and France.

Reports from the U.S. Department of Agriculture show the devastating effects of conflict on Ukraine’s wheat sector:

The 2022-23 wheat crop just harvested showed a 37 percent decline from the previous year’s production, down 25 percent from their five-year average.

ukraine war, Our Daily Bread: Uncertainty in Global Wheat Markets

Not surprisingly, Ukraine wheat exports have dipped as well, falling from roughly 18 million metric tons last year to a projected 10 million in 2022-23, according to the Ukrainian Grain Association.

Ukraine wheat remains very price competitive, and the near-by European Union still relies on available rail and other transportation channels to buy as much as 45 percent of Ukraine wheat exports, the USDA estimates.

Ukraine’s uncertain future

The risks associated with the conflict continue to generate high shipping and insurance costs, and Ukraine trade officials seem content to focus undamaged resources and energies on more lucrative market opportunities for corn and oilseeds.

Imagine trying to farm when your country is at war. You know growing food is important, but so is your freedom. In a country slightly smaller than the size of Texas, it is hard to separate farming and fighting. In addition, wheat production overlaps areas of Russian invasion.

As a dire result, Ukraine has even less land as the Russians have taken over 3.8 million hectares of beautiful rich black soil of Ukrainian farmland and another 3.8 million are too close to the frontline, either destroyed, and/ or full of landmines.

ukraine war, Our Daily Bread: Uncertainty in Global Wheat Markets

In addition, even the land further away is difficult to manage because of financing, lack of working capital, and high fuel and fertilizer costs. All of this makes it difficult to sow seeds this spring.  Yet, it is a credit to human nature that the farmers are optimistic they will win the war.

It is expected that the fighting will pick up this spring. Russia is moving 500,000 recruited Russian troops in the area and the 60,000 Ukrainian troops have been training with NATO countries (watch operational update here). It seems that May will be a telling month.

Next week, D2D will explore the importance of Russia’s wheat exports and why they are important for global food.

[Subheadline: Despite Progress, Resolution of Russia/Ukraine Conflict Remains Critical to Global Food Security  |   Keywords:  Russia, Ukraine, bread, wheat, food security, hunger, invasion, conflict, Black Sea, shipping, exports, emigration]

The Bottom Line

Wheat is one of the most necessary staples in diets around the world. Without it, there can be riots and starvation. While Ukraine is not one of the top three wheat exporters, this war is and will continue to put stress on the global wheat supply. 

D2D-illustration Bottom Line