🔎 Wheat is more omnipresent than we may think: bread, pasta, cereal bars, beer, and even some ice cream require wheat. With the ongoing Russia-Ukraine War, it's become impossible for the world to tap into the two countries' massive wheat supply like before. To understand how curbed wheat supplies have affected the world, we take a look into our own lives as well as countries that import most of their wheat from Russia & Ukraine.
Tune into Episode 14 to learn more about the situation.
🎙 Tridge's Global Market Analysts Bea Shim and Ben Lategan discuss the situation
💻 Want more agricultural insights? Get smarter and stay updated on the most important agricultural updates on https://www.tridge.com/intelligence-data.
0:00 Hey, thanks for stopping by.
0:02 This is Free on Board a Podcast by Tridge.
0:05 You're in the right place if you're looking to stay up-to-date with the latest food and agricultural news
0:10 Now onto the updates
0:21 [Bea] Welcome to Free on Board
0:22 [Bea] Ben, our Global Market Analyst, is with me today
0:27 [Bea] and without further ado, let's hear from Ben himself
0:30 [Ben] Hey Bea, it's great to be here.
0:31 [Ben] I'm super excited to discuss the latest developments in agriculture with you today.
0:35 [Ben] So let's get right into it.
0:37 [Bea] So okay, we've meticulously picked out stories that are very likely to be relevant to most of our listeners.
0:44 [Bea] That in itself, I know, is a pretty bold statement given that our audience demographic is pretty much all over the world
0:50 [Ben] and that's because our particular product is omnipresent in how versatile it is
0:55 [Ben] not just in my life, but probably in yours too.
0:58 [Ben] Bread, beer, pastries, cereal bars, crackers, you name it.
1:03 [Bea] Absolutely.
1:04 [Bea] So let's get to our stories of wheat.
1:06 [Bea] So Ben, can you give us an update on the current global wheat situation?
1:11 [Ben] Yes, The Russia Ukraine war is causing serious turbulence in global wheat markets.
1:17 [Ben] Together, the two countries are responsible for 29% of the world's wheat exports and that's huge.
1:23 [Bea] So let me get this right
1:25 [Bea] Russia and Ukraine are responsible for nearly a third of wheat changing hands in global markets.
1:31 [Ben] Yes, that's correct.
1:32 [Ben] And currently, Ukraine is unable to export wheat due to Russian warships stationed off its southern coast
1:39 [Ben] preventing cargo ships from entering or leaving the ports
1:42 [Ben] and to make matters worse, Russia recently banned wheat exports to ex-Soviet Union countries.
1:48 [Ben] And this is causing major supply constraints in wheat markets across the world.
1:52 [Bea] Right.
1:53 [Bea] And with sanctions also placed against Russia
1:55 [Bea] and the inability to traverse through the Black Sea in itself has made it virtually impossible for buyers to get wheat out of the region.
2:03 [Bea] To give you a more specific figure, Ben,
2:06 [Bea] Ukraine’s grain shipments have dropped from their usual 4-5 million tons per month to a few 100,000 tons a month.
2:14 [Ben] Wow, that's quite a drop in exports.
2:16 [Ben] But didn’t Ukraine recently make efforts to export their goods through their railway though?
2:21 [Bea] Yeah, so Ukraine's railways are, you know, they're going
2:25 [Bea] But Ukrainian traders are continuing to search for the possibility of redirecting exports to Europe by rail or via Romanian ports.
2:33 [Bea] But there are still massive barriers like logistics ability and high cost.
2:38 [Bea] A Reuters report said that delivering Ukrainian grain to the Romanian port of Constanta was approximately $150 per ton.
2:47 [Bea] And for comparison, it was around $40 to transport grain to Ukraine's Black Sea ports.
2:53 [Ben] That's like a…270% increase.
2:57 [Bea] Yeah, but the country is still struggling with the backlog of grain wagons on their Western border.
3:03 [Bea] The volumes that Ukraine is able to get across their railway are a fraction of their full export potential.
3:09 [Bea] But it's really better than exporting nothing for the country.
3:12 [Ben] Yeah, that's true.
3:15 [Ben] But it's also worth noting that because Ukraine is only able to export a fraction of the usual wheat supply,
3:20 [Ben] countries that are heavily dependent on Ukrainian wheat will have to find alternative sources or risk a shortage in wheat supply.
3:28 [Ben] The same goes for countries that heavily rely on Russian wheat, yet it doesn't mean that there won't be wheat for these countries.
3:35 [Ben] Most countries have wheat reserves and may be tapping into them to make up for the lack of wheat, especially in the short term
3:42 [Bea] I see, wow.
3:43 [Bea] But even with wheat reserves, I would imagine that these reserves wouldn't be able to make up for all the wheat that countries around the world couldn't import.
3:52 [Bea] Right?
3:53 [Ben] Yes, that's 100% correct.
3:55 [Ben] The lack of supply and circulation will definitely lead to higher wheat prices
4:00 [Bea] and prices rising from the wheat
4:02 [Bea] crisis has been manifested in many parts of the world already and this is affecting some countries
4:08 [Bea] a lot more than others.
4:09 [Bea] What is it like in South Africa right now?
4:13 [Ben] Yes, in South Africa, where I am based, we import approximately 50% of our wheat and that's not an insignificant number.
4:20 [Bea] Yeah, definitely not insignificant.
4:22 [Ben] That's huge.
4:23 [Ben] Absolutely.
4:24 [Ben] So South Africa is heavily dependent on wheat imports to meet the local demand
4:28 [Ben] and that has led to wheat-based food prices rising rapidly,
4:32 [Ben] With the price of bread, for example, increasing 3.2% in the course of a month, with further increases expected.
4:39 [Bea] Yeah, a 3.2% increase month over month.
4:43 [Bea] And I would imagine with South African weak consumption being the highest and sub-Saharan Africa,
4:49 [Bea] the typical meal might be heavily flour or wheat dependent, right?
4:54 [Ben] Exactly.
4:55 [Ben] And this is especially true for low-income households.
4:58 [Ben] So the worst part of this sweet crisis for South Africa is that it affects the people who are already struggling or just getting by the hardest.
5:06 [Bea] That's really sad.
5:08 [Bea] Are there any alternatives?
5:10 [Ben] Yes, there is.
5:12 [Ben] Maize flour which is made from corn
5:14 [Ben] so maize serves as a staple in many South African diets and is used to make porridge and bread
5:20 [Ben] now, although it's not a direct replacement, it can be used as a substitute for wheat flour.
5:25 [Bea] Okay, very interesting.
5:27 [Bea] Although I don't think that really solves South Africa's problems, since maize is in a similar boat as wheat right?
5:34 [Bea] With Russia and Ukraine together being responsible for 14% of global maize exports.
5:40 [Ben] Yeah, South Africa is definitely not in an ideal situation.
5:43 [Ben] Luckily, the majority of our wheat comes from countries other than Russia and Ukraine, so at least we won't have supply issues.
5:51 [Ben] How’s it like in South Korea at the moment?
5:53 [Bea] Sure, well I don't know how surprised you'd be by this fact:
5:57 [Bea] So South Korea imports, not 50%, but 99% of its wheat
6:03 [Ben] wow and I thought we were dependent on wheat imports.
6:06 [Bea] Yeah, that does call for a wow.
6:09 [Bea] we only produce 1% of the week we consumed domestically.
6:13 [Ben] That's crazy.
6:14 [Bea] Yeah,
6:15 [Bea] I mean, the shortage of wheat will have a ripple effect on so many food-related industries in South Korea.
6:21 [Bea] But let me tell you: in some ways, they've already manifested in my life directly, 6:27 [Ben] what impact does that have on your life?
6:30 [Bea] So let me give you some context
6:34 [Bea] on Friday or Saturday nights, when my dad and I both happened to be home,
6:37 [Bea] we usually head out to the convenience store.
6:40 [Bea] We typically go to a 7 11 nearby home
6:43 [Bea] and they always, as do other convenience stores in South Korea, have four cans of beer for 10,000 KRW, which is approximately $8.30 USD
6:55 [Bea] And that's a pretty good deal.
6:56 [Ben] Oh Beer!
6:57 [Ben] Which one do you guys usually drink?
6:59 [Bea] So I usually get Stella Artois and Guinness.
7:03 [Ben] Okay, nice choices.
7:04 [Ben] But what about that?
7:05 [Bea] Yeah, but the prices have risen, right?
7:08 [Bea] So they've been 10,000 KRW for four cans of beer ever since I can remember 7:13 [Bea] which, honestly, isn't too long ago
7:15 [Bea] I did some research and this package deal started in 2014 and it's been a popular
7:20 [Bea] like almost taken for granted passive presence in my life
7:24 [Bea] So eight years since its release, it's risen in price by 1,000 KRW
7:29 [Bea]Which is almost equivalent to a USD
7:33 [Ben] I can see why you would say that the shortage of wheat has directly affected your life.
7:39 [Bea] Yeah.
7:40 [Bea] But hey, this is really nothing, especially compared to those who rely on Russia and Ukraine for their wheat supply
7:46 [Bea] South Korea's traditional main meals don't necessarily center around wheat but rather on rice
7:54 [Bea] but it’s still difficult, right?
7:55 [Bea] Our bakeries, and restaurants selling noodles will have to struggle.
7:59 [Bea] Some countries around the world have wheat included in their main meals AND rely 100% on Russia and Ukraine for their wheat.
8:07 [Ben] You're 100% right there, Bea
8:09 [Ben] So, Somalia imports close to 70% of their wheat from Ukraine and the rest from Russia – and wait for it:
8:15 [Ben] Benin imports 100% of their wheat from Russia
8:20 [Bea] I hope the wheat crisis hasn't hit Somalia and Benin too hard.
8:26 [Bea] Do you know if wheat is part of their staple foods?
8:28 [Ben] Yes.
8:29 [Ben] So wheat forums part of the staple diet of Somalia.
8:32 [Ben] So not only will they face inflated wheat prices, they will also have to find alternative sources for practically all of their wheat supplies,
8:40 [Ben] which is not going to be an easy task.
8:42 [Ben] Now this could lead to serious food shortages.
8:44 [Ben] Somalia already faces food supply issues under normal circumstances.
8:49 [Bea] I see.
8:49 [Bea] So what about the countries that produce more wheat than they consume?
8:53 [Bea] Do you think they will face the same supply issues and price increases as net importers of wheat?
9:00 [Ben] They will not have supply issues but they will face the same food price increases as countries that import wheat.
9:05 [Ben] Australia is a prime example of this.
9:08 [Ben] Now, Australia had a bumper harvest in 2021 and has no need to import wheat.
9:13 [Ben] However, they are experiencing increased bread prices as wheat for local consumption has to compete with the increased prices that international buyers are willing to pay.
9:21 [Ben] So it seems that the Russia Ukraine war is causing a truly global wheat crisis with countries all over the world being impacted in various different ways.
9:30 [Bea] Absolutely.
9:31 [Bea] So, Ben, we're nearing the end of our time together.
9:34 [Bea] Can you give us a takeaway for today?
9:36 [Ben] Yes, sure.
9:38 [Ben] To sum it all up,
9:39 [Ben]the Russia Ukraine conflict has caused supply constraints in almost a third of global wheat export volumes
9:44 [Ben] and this has led to disruptions in wheat availability and in wheat exports, which has led to significant increases in the price of wheat.
9:52 [Bea] Yeah, As end consumers, we experience wheat shortages in the form of increased prices on the shelves
9:58 [Bea] from staple foods such as bread and flour to our favorite beers.
10:03 [Bea] it makes sense that all wheat-derived products are more expensive at the moment
10:09 [Bea] and that is all we have for you today.
10:10 [Ben] Thanks for tuning in, bye!
10:29 If you enjoyed this episode, please leave a review, subscribe, and share our podcast.
10:34 Check out tridge.com/intelligence-data for more price analyses and up-to-date insights into the food and agriculture industry.