Consumers are in for a roller coaster ride; another look at the global good crisis

BY STEVEN KASZAB

Wheat prices have tumbled from their peak when Russia had invaded Ukraine, but one of the world’s most consumed items remains in short supply. Much like oil, steel and beef, wheat shifts its price and availability in response to many complex factors such as geopolitics and the weather.

Declining prices of wheat creates a challenge to our economies, one where low prices of wheat may not give farmers the incentive to plant more wheat, thereby creating more scarcity of this product, and its many offtake products. A lower price for wheat does not deal with the ever-increasing cost of energy, which affects the cost of running farm equipment, its transportation and even the manufacturing of needed fertilizers. Hot, dry weather is also cramping the farmer’s style of crop growth. Our global economy is facing a potential situation where food prices could spiral out of control.

Russia and the Ukraine account for 1/4 of global wheat exports. A man made crisis that may go into the long term. Add global drought episodes, and we are facing a combination of scarcity, corporate profiteering and ultimately food price gouging like not seen before. Wheat prices are at a level seen before the year began. $7.75 per bushel jumped to over $13.00 right after Russia invaded Ukraine. The price stayed in double digits through June and then began to fall to an $8.00 a bushel level. Winter wheat stocks also brought the price down and a deal between Russia, Ukraine and the United Nations has allowed some wheat to be shipped to international markets.

The cost of wheat and many other foods have been affected by the war between Russia and Ukraine, but the real factors that will affect the price of bread, cereal and other items will be: climate change, the price of fuel, and fertilizer. Climate change is making crop growth highly unpredictable. Lack of rain, drought level microclimates and over harvesting of single crop items are limiting what can be grown and harvested each year.

In Canada, temperatures soared to record highs, making 3/4 of the country’s 2021 agricultural land abnormally dry. Canada’s wheat crop dropped to nearly 40% from 2020 to 2021, causing its exports to Latin America to decline by over three million tons. In 2020 wheat was about 30% cheaper than it is now.

Because Russian fertilizer is so important to the global farm trade, it avoided international sanctions. Although high prices hurt countries that import wheat, low prices might dissuade farmers from planting extra crops this year. Over the past decade the number of farms closing production has increased. Family farms are decreasing, while corporate farms specialize in the most profitable of crops, crops that feed the nation.

Like the stock exchange, food prices are moving up and down, making money for some, and costing money for others. Whether the costs are artificially kept high, or there really is no controlling our food costs, the end consumer is in for a roller coaster ride, and their pocket books need to look out.