Food prices in Canada will rise as Russia invades Ukraine, ‘the breadbasket of Europe’ – National

Russia’s invasion of Ukraine is already mounting pressure on the prices of commodities like wheat and oil, with experts saying a prolonged conflict could have a significant impact on food price inflation in the country. Canada.

Russian attacks forced Ukraine to close its trading port on Thursday, affecting the country’s main grain exports. Ukraine ships corn and barley to global buyers and also competes with Russia as the main wheat exporter to the continent.

Together, the two countries account for 29% of global wheat production, according to Reuters.

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Markets have already woken up to the potential for Russia’s unprecedented act of aggression to disrupt food supply chains.

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Wheat futures rose as high as US$9.30 a bushel on Thursday, setting a nine-year high.

“Ukraine is the breadbasket of Europe,” says Sylvain Charlebois, director of the Agrifood Analysis Laboratory at Dalhousie University.

Ripple effects at the grocery store

With oil prices up more than US$100 a barrel, Canada’s grocery sector is poised to be hit hard by rising raw material and transportation costs, Charlebois told Global News. .

“We have a trucking economy in North America, so that’s going to be problematic… (it’s going to) obviously worsen our food inflation situation in the western world and also in Canada,” he says.

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Pressure on grain products may hit the bakery first, but Charlebois says the costs will soon be passed on to other aisles of the grocery store as livestock feed becomes more expensive and meat prices rise. , dairy products and eggs will increase in turn.

While Canada’s annual inflation rate hit 5.1% last month, its highest level in more than 30 years, the agri-food lab pegs inflation on food at 6.5%. Charlebois says the lab was already forecasting that rate to reach 7% this year, although the latest events in Eastern Europe are now likely to push food inflation beyond that mark.

“What this conflict is going to do is bring a new layer of uncertainty and that will impact how companies negotiate prices, how they plan and things like that,” he says.


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Canadian production hampered by supply chain issues

While prices are likely to be hit, Canadians’ access to baked goods is likely secure, Charlebois says — more so than European countries that are more dependent on Ukraine.

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Canada has a large domestic agricultural industry, which depends on little or no grain products from Eastern Europe, says Dave Quist, director of Western Canadian Wheat Growers, a lobby group representing producers in the Prairie provinces.

While rising wheat prices could allow farmers to get more for their own exports, he says Canadian producers are facing their own setbacks, making it difficult to increase production.

First, given the production cycles of cereal crops, most farmers have already placed their seed orders and made crop rotation plans by fall.

The industry has a brief window to adjust its plans before planting begins in April, Quist says, but there is still a short window to significantly increase crop yields to offset potential shortages in Europe.

“There’s very little fallow land that’s not being used right now,” Quist notes.

Farmers are also still dealing with the supply chain impacts related to COVID-19 that have plagued various industries around the world for months.


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Many growers are struggling to get machines to their fields as shortages of semiconductors and parts that have led to delays in new car deliveries have also hit tractors and other farm equipment.

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Fertilizer is the other missing piece – delays by biopharmaceutical company Bayer are currently “reverberating throughout the industry”, says Quist.

Charlebois notes that Belarus and Ukraine are also hubs for fertilizer production, so further disruptions will only make the supply of key agricultural inputs more expensive for Canadian farmers.

“The global food supply chain is still a mess. We are still trying to figure out what normalcy will look like on the other side of the pandemic,” Charlebois says.

Quist says other major wheat exporters such as Australia and Argentina had bumper harvests last season and are expected to continue producing global flows through the summer. Disruptions in Ukraine, he predicts, will begin to affect other regions in the fall.

With the Bank of Canada set to make an interest rate announcement next week as part of its mandate to rein in soaring inflation, Charlebois notes that food bills and groceries – tied to globally set commodity prices – are largely out of the hands of policy makers.

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The main determinant of rising wheat and other commodity prices may be the ultimate duration of the Russian invasion.

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“We don’t know how long this conflict will last,” Charlebois said. “But the longer this goes on, the more companies will have to review their sourcing strategy and how they price their products to their customers.”

— with files from Reuters


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