China, India, and Russia are the three largest wheat producers in the world. The United States is the fourth-largest wheat producer in the world. Wheat is the second most important grain that is cultivated in the United States, following corn. Wheat is one of the most demanding and useful food crops. There are numerous uses of wheat such as used as raw material for producing many bakery foods (bread, crumpets, biscuits, muffins), noodles, sweet and savory food items, pastries, pasta, and pizzas.
The leading wheat-growing states in the U.S. are North Dakota, South Dakota, Minnesota, Iowa Wisconsin, Kansas, Washington, Idaho, and Oklahoma. These states produced more than 100 million bushels of wheat. Kansas produces half of the country’s total production from which half of it is used for local consumption and the rest is exported to the rest of the world. In the U.S.A, wheat is categorized into two seasonal varieties, Winter & Spring wheat, and Durum wheat.
Even though the United States on average produces only about 6-7 % of the world’s wheat, it is a major wheat exporter. Despite expanding its global wheat trade, the U.S. share of global wheat exports is low, estimated to be at around 10 %for 2021-22.
In 2022, the conflict in Ukraine (which produces around 10 % of the global supply) has pushed up wheat prices, which continue to rise due to the negative effect on wheat supply caused by the disruptions because of the Russia-Ukraine war. And the demand factors have accelerated the prices, which are breaking records
This is affecting many major industries throughout the world economy. Hence, the rise in global wheat prices is a major concern for the world economy. Here are the following factors that affect wheat prices:
- Black Sea Grain Corridor This Agreement was established to transport grains from Ukraine ports safely. The Black Sea Grain Initiative aims to meet global demand, prevent global hunger, address global food insecurity, and ensure the safety of merchant ships delivering grain and food products. This agreement was to expire on 19 November 2022 unless renewed. However, Russia suspended its participation in the agreement on 29 October because of a drone attack on Russian naval ships in the port of Sevastopol. Regardless of Russia's non-participation, several grain ships continued to depart from Ukrainian ports with the U.N. and Turkey's approval, although it is unclear whether these shipments can go on indefinitely. Given the Russian President’s unpredictable actions so far, there is no guarantee that this agreement will be renewed.
- Oil Prices Oil and wheat prices are correlated as oil is an essential input for tractors and in machinery used for farming crops. And when the oil price hikes, it impacts the cost of producing the output such as wheat, which ultimately adds more to the price of its output. This also directly affects the cost of transporting wheat around the world.
- Geo-Political Factors- The Russian invasion of Ukraine in 2022 has significantly impacted the wheat supply because Ukraine, Russia, and other former countries of the Soviet Union are major wheat-producing countries. In 2019, 8.9 % of the world’s wheat exports were grown in Ukraine, and 14% in Russia, Therefore, approximately a quarter of world exports come from these two countries Russia and Ukraine. The conflict in Ukraine has disturbed supply, and restrictions on Russia have also affected the supply of wheat in the world market.
The hike in global food prices has become the problem of the world food crisis in a decade, and it is getting worse due to the increase in several countries banning and restricting exports of wheat and other food crops. as they have a wrong assumption of putting a lid on high prices. India has said that they are banning food exports to manage the country’s overall food security. As India and Indonesia have mentioned - they are banning food exports to ensure food availability domestically, since global food inflation has skyrocketed after the war in Ukraine.
Eight countries comprising Algeria, India, Indonesia, Serbia, Kosovo, Ukraine, and Kazakhstan have restricted wheat export in 2022
The purpose of restricting these countries' wheat exports is to safeguard and protect their local communities. It is not limited to wheat exports only; many countries have also implemented bans on other commodities exports, as global inflation soars because of the Russia- Ukraine Crisis. The main driver of global inflation is the soaring prices of specific food commodities such as fertilizers, oils, cereals, wheat, and other food crops.
Everyone suffers due to the high prices, but the poor are hit the hardest, specifically in developing and underdeveloped countries. This is an invitation for more problematic situations shortly, and the 2008 food crisis is a relevant example. During the past crisis, there was a significant increase in malnutrition, particularly among children. Some studies show school drop-out rates of approximately 50 % among children from the poorest households. This is an alarming situation, and the world needs protection from such a crisis and its effects.
To defuse this catastrophic food crisis, it is essential that all food crops and food commodities trade restrictions imposed since the start of the year be lifted as soon as possible. The war between Ukraine and Russia has created unnecessary suffering for vulnerable people everywhere. So, the global community must cooperate fully to expand the flow of food across the world to avoid the global food crisis.