The United States Department of Agriculture (USDA) has predicted that high commodity prices would shift consumer demand and Trade patterns.
High prices for staple crops such as wheat can shift consumer demand to other foods such as rice. Rice, a primary food grain in many lower-income markets, remains plentiful and affordable relative to wheat and corn. A shift in commodity prices would always result in buying less of each commodity or substituting one commodity for another.
“Higher feed costs will impact prices for poultry and other proteins. In lower-income countries, these tend to be the highest expenditure food items, and consumers are likely to reduce purchases of these items first, leading to lower protein consumption. Import demand for some agricultural commodities is relatively inelastic, meaning demand remains roughly the same even when prices increase. Buyers may be required to source products from other markets, particularly for wheat, corn, barley, sunflower meal, and oil originating from the Black Sea region.”USDA
Russia-Ukraine accounts for major exports of agri-commodities
According to USDA, Ukraine accounts for about 10 percent of global trade in wheat, adding that Ukraine exports mostly milling wheat to Middle Eastern and African countries and Bangladesh and feed-quality wheat to other Asian countries.
Exports primarily occur immediately after harvest in July, with March to June being a slower shipping season. Many countries that rely on Ukrainian wheat are shifting purchases to the European Union, India, Australia, and Argentina. Both Australia and Argentina have record wheat production, while India’s wheat supplies remain sufficient. The United States wheat is available for export but at a higher price relative to other suppliers.
The USDA noted that Ukraine accounts for about 15 percent of global trade in corn and barley and primarily exports feed corn to the European Union, China, the Middle East, and North Africa, adding that exports are seasonally strong between November and May, it noted.
The USDA reported that Ukraine and Russia account for roughly 80 percent of global exports for sunflower oil, so other suppliers cannot offset reduced Black Sea shipments. However, importers will likely substitute with less expensive oils that are more readily available, including palm oil from Southeast Asia and soy oil from Argentina, Brazil, and the United States. There will be edible oil available for importers, but they will pay more.
In March, palm oil prices hit record levels, and soy oil prices rose to their highest levels in decades, causing countries with a ban on palm oil consumption to revoke their prohibition because of the shortages in sunflower oil.
Call to action for heavy importer of agri-commodities
As observed over the years, developing countries dependent on food imports are the most vulnerable to food insecurity. Such countries respond to price signals by shifting consumption and trade patterns, while larger exporting nations react by increasing production to meet demand. However, the geopolitical mayhem of a war between two major agricultural exporting countries, including the world’s largest fertilizer exporter (Russia), adds additional uncertainty and concern to the current global situation.
Some agri-experts have advised heavy-importer countries of agricultural commodities to devise sustainable means of achieving self-reliance in food production in the next decade as food insecurity looms.