Overseas export ban threatens to push sky-high food prices

Soaring food prices in the U.S. and abroad have prompted countries to ban exports of core agricultural products, pushing up domestic food prices And leading agronomists want to know what other crops might face supply constraints on their way to the grocery store.

Food inflation in the United States has reached its highest level in 40 years, with the annual consumer food price index rising 9.4% in April, the biggest 12-month gain since 1981, according to the Labor Department.

Prices of meat, poultry, fish and eggs rose more than 14 percent from last year, the largest increase since 1979.

A partial wheat export ban announced by India over the weekend boosted prices of the winter wheat crop by more than 8 percent before stabilizing slightly on Wednesday. The decision exacerbated the commodity crunch triggered by the war in Ukraine, often referred to as Europe’s breadbasket.

“It is widely believed that India will be able to fill the large supply gap that Ukraine has historically filled, but it is unlikely to fill this year,” said Mark Jekanowski, a research economist at the Department of Agriculture and chairman of the USDA, whose world The Agricultural Outlook Committee said in an interview.

“The news of India’s ban on exports – that has pushed up prices and indicated that global supplies are tightening further,” he said.

Ukrainian officials have been drawing attention to the country’s ample food reserves, and the Russian military invasion is now in its 12th week.

“If you see rising prices and shortages of flour and grains in your country, it’s because of Russia’s attack on Ukraine. We have a lot of agricultural products in our warehouses, that’s all for 2021,” Ukrainian Foreign Minister Dmitro Kuleba said last week. Crops, ready to be shipped around the world.

“The only reason we don’t is because Russia continues to block our ports and not allow exports,” he said.

But economists are quick to warn that because food prices are determined by global commodity markets in many different countries and suppliers, there is no one-to-one relationship between export bans and higher prices.

“Overall, the impact of banning Indian wheat exports will be positive, tending to push prices higher, but beyond a short-term panic response, the impact will actually be very, very small,” said Montana State University agricultural economics professor Vincent Smith said in an interview.

What’s “more worrisome” about bread prices are gas prices and shipping costs — sending wheat to the mill, flour to the bakery, bread to the supermarket, and it’s stacked on the shelves,” Smith said. “A lot of what we’re talking about ‘Food price inflation’ is inflation that affects the particular issue of rising labor costs and energy prices. ”

Washington insiders and politicians from the farm state agree with this analysis.

“Now, I agree with those who say we will not have food shortages in the United States of America. You may see some products [facing shortages] It’s like baby formula, but in general, you still see that box of Wheaties on the shelf,” Heidi Heitkamp (D), a former North Dakota senator and prominent agriculture advocate, said in an interview.

“But the increase in commodity transportation costs will be the main factor driving up commodity base prices.”

India’s wheat export ban is partly due to domestic political concerns and fears of unrest following nationwide farmers’ protests in 2020 and 2021. The ban is just one of many restrictions countries have imposed on key ingredients in food, adding to the overall inflationary environment.

According to a list compiled by the International Food Policy Institute, a Washington-based nonprofit, 20 countries currently have export bans on a variety of food products, resulting in a 30 percent increase in global food prices as measured by the United Nations’ Food and Agriculture Organization.

These include export bans on palm oil from Indonesia, pasta from Algeria, beef from Argentina, sugar from Pakistan, wheat and vegetable oils from Egypt and cereals from various African countries – all of which could contribute to the overall inflationary environment that shoppers feel. American grocery store.

Experts say protectionist policies are currently surging in agricultural trade but also extend to other sectors of the economy and supply chains, with risks.

Claude Barfield, a former adviser to the U.S. Trade Representative’s office, said in an interview that growing protectionism “is definitely a big danger.” “It’s not clear how this will all work out.”

Other agriculturally sensitive areas now include certain countries in South America as well as China, where “there are rumors that this year’s wheat harvest may not be good,” Smith said.

Although China may end up being a net importer of wheat this year, Smith said, “We never know what China will do because decisions about imports in China are still largely made by the ruling party.”

Brazil’s corn crop is now weeks away from harvest, and economists are keen to see how its size and quality affect global prices.

“The export bans of Indonesian palm oil and Indian wheat were very surprising when they happened, and they underlined how unpredictable it was,” Jekanowski said.

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