Harvester of Sorrow: Ukrainian supply disruptions are only a part of food inflation

Wheat prices up 38%

Near the start of February, I discussed the implications of soaring natural gas prices on fertilizer production and food prices. It seems fair to say things have escalated significantly in the subsequent period, with the S&P GSCI Agriculture Spot index having since rapidly moved a further 16% higher to all-time highs. More startlingly, grains prices have moved far more sharply higher with wheat prices (at time of writing) up 38%.

Much as I would like to claim foresight in this regard, the true cause has been, of course, the escalation of tensions between Russia and Ukraine into a full-blown invasion of Ukraine. This has clearly provided a supply shock to global food supplies. This, in particular, explains the additional upside experienced by wheat; Russia and Ukraine are the world's first and fifth largest wheat exporters respectively, accounting for a combined total of c25% of global wheat exports. The Ukrainian supply is obviously facing sharp challenges, but Russian supply is facing logistical challenges to re...