We are about to get a real shock with regards to food prices. Ukraine and Russia are major suppliers of wheat to the world markets with Russia accounting for 19% of the global wheat export market and Ukraine 9%*. And wheat makes up a massive part of total calories with regard to the global food system. If you haven’t heard, those two countries are at war and sanctions are in play. Correspondingly, after Russia invaded Ukraine, the price of wheat shot up.
Here are some trends that I see in the next year:
- First, the last time something like this happened, the Arab spring took place. When people are hungry, they are more likely to overthrow their government, so get ready for revolutions to sprout up in developing and emerging markets.
- Second, we can anticipate increased trade tensions. We will likely see nations hoarding valuable commodities like wheat, because they don’t want my first point to happen to them.
- Third, we are already experiencing record inflation, and this only makes it worse. Or does it in the end? My guess is, at least in the USA, people will shift their spending from luxury goods when needed to sustain and feed themselves .
In the end, I forecast developing markets will bear the brunt of this. America will adjust, and the world will recover, but my belief is this will be difficult over the next couple of months.
*Source: Food and Agriculture Organization of the United Nations