food inflation

Russian invasion of Ukraine fuelling food inflation in Canada

Even aside from the direct pain and trauma caused in Ukraine, the Russian invasion is having serious impacts across the world, including on the food production and foodservice industries. With inflation already at its highest rate in decades in Canada and food inflation soaring, wheat is the latest staple ingredient to surge.

Ukraine is one of the largest wheat exporters in the world, producing slightly less than Canada yearly. Unsurprisingly, the country’s planting season, due to start within the month, is expected to be decimated by the Russian attack. Aside from the obvious impacts of war, much of the farming industry in the country relies on foreign labour, and many such workers are fleeing or will not enter the country.

In addition, the invasion has led to a ban on all commercial vessels in the inland sea of Azov, the main connection to the Ukrainian port hub of Black Sea. Almost 90 per cent of Ukrainian grain exports are transported by sea; the effect of the prohibition is huge.

According to CBC, Canadian wheat producers have warned that the situation will make it extremely difficult for Ukrainian farmers to get their seeds in the ground. The knock-on effects of that are likely to see looming shortages worsen and drive up the retail prices of food like bread and pasta, as well as jeopardize food security in other countries.

For example, south of the border, Chicago’s benchmark wheat prices have soared more than 50 per cent since the invasion began, with the price of a bushel of hitting US$12.94 on March 7, up from about US$7.58 at the start of the year.

It’s not just bread products that could see price hikes, either. The vital grain also goes into cattle feed — a key input cost in dairy and meat production.

“We rely heavily on Ukraine and Russia to feed the rest of the world, particularly when it comes to wheat,” said Sylvain Charlebois, professor of food distribution and policy at Halifax’s Dalhousie University. “Nobody’s immune to what’s going on in Ukraine… Higher wheat prices could eventually impact retail prices in Canada.”

Certainly, these increases will ultimately compound the already eye-watering inflation being seen in grocery stores, restaurants, and other food and beverage establishments. Statistics Canada reported last month that bakery product prices rose 7.4 per cent in January compared with a year ago, outpacing the food inflation rate of 6.5 per cent. The agency puts that down to unfavourable growing conditions and supply chain disruptions.

The threat has been exacerbated by a drop in global stocks of major exporters, with supplies in Canada, the U.S., the European Union, Russia, Ukraine, Argentina, Australia, and Kazakhstan set to fall to a nine-year low of 57 million tonnes by the end of the 2021/22 season, according to International Grains Council data.

In addition to wheat, Ukraine is the fifth-largest producer of corn in the world, with 13 per cent of all world exports in corn.

For the coming season, the conflict in eastern Europe is also affecting the supply of fertilizer, a key necessity for wheat crops.

Charlebois writes that the conflict will “bring to the agri-food sector a new layer of uncertainty, at the worst possible time”. Canadian — and global — food producers, sellers, and consumers must brace for a prolonged impact.