ALEX WAUGH, DIRECTOR OF UK FLOUR MILLERS
4 March 2022
The dreadful situation in Ukraine has had side effects in many areas, including wheat markets. Russia and Ukraine account for about 30% of world-wide wheat exports. Although much of what they produced from the harvest in 2021 has already been shipped, there is some that remains in store. There are also medium-term concerns about the prospects for the next harvest (in August / September) and what may be available.
The UK imports almost no wheat from Ukraine or Russia for human consumption. Most of the wheat we use is grown in Britain. Imports account for only 15% of our requirements, and these come mainly from Germany and Canada. Therefore we are not anticipating any supply problem or availability issues. However, prices of wheat have risen steeply on all markets. Between 16th February and 3rd March, the quotation for wheat on the London futures market rose by 28%. There have been very similar increases elsewhere (eg France, USA) as all markets are connected.
This sharp jump in market prices follows earlier increases as a result of relatively poor harvests in 2021. It is inevitable that in time they will feed through in increased consumer prices for a range of foodstuffs that depend on grain as a key input. These include items like bread but also a range of other foods such as eggs, meat and more. This is likely to lead to a higher level of UK food price inflation, sustained over a longer period than had already been anticipated.
The crisis has also led to increased costs for energy – another key ingredient for food manufacturers – and the fertiliser which farmers need for their crops. As with grain, these will have an inflationary impact on the economy and put additional pressure on household budgets.
An updated statement, published on 30 July 2022, can be found here.