Russia's recent pullout from a deal that allowed Ukraine to export grain will likely impact prices in Canada.
"Both Russia and Ukraine are very large grain producers," Opher Baron, a professor of operations management at the University of Toronto's Rotman School of Management, told CTVNews.ca Tuesday. "Any long-lasting shortage of grains export from either would change the price of grain, as it is a global commodity."
On Saturday, Russia announced that it was immediately pulling out of a deal that allowed ships to export grain from Ukrainian ports.
Brokered in July by the United Nations and Turkey, the short-lived deal saw more than nine million tons of grain leave Ukraine on 397 ships. Other food stuffs and fertilizer were also allowed safe passage via a humanitarian corridor in the Black Sea. According to the UN, the grain agreement helped bring down global food prices by about 15 per cent, after they rose sharply following Russia's February 2022 invasion.
"It affects everything because it's about 15 per cent of all calories consumed on Earth," Dalhousie University food security expert Sylvain Charlebois told CTVNews.ca. "You're basically seeing a global breadbasket being impacted by geopolitics and a huge conflict."
The UN, Ukraine and Turkey plan to continue the program, and 12 vessels were reportedly able to leave Ukraine as of Monday. It remains to be seen if or when Russia will forcefully reimpose its earlier blockade on Ukrainian ports.
"I think it's really an unfortunate turn that the pact has ended," Charlebois, who is a professor and the senior director of Dalhousie's Agri-Food Analytics Lab, said. "It doesn't bode well for the future. It's going to be extremely difficult for Ukraine to mobilize anything, which will discourage farmers to grow anything, which will eventually impact wheat prices around the world. And that's kind of what we're starting to see the last couple of days, unfortunately."
According to Statistics Canada, the world's largest exporters of wheat in 2021 were Russia, the U.S., Australia, Canada and Ukraine; that's since been upended by war and sanctions.
In the wake of Russia's February 2022 invasion of Ukraine, a showed prices of bread, pasta and cereal were up from more than 12 per cent to nearly 20, while total stocks of Canadian wheat were down by almost 40 per cent. Food manufacturers meanwhile were paying almost 75 per cent more for wheat in April 2022 than they were a year prior. Canada produces most of the wheat it consumes, which still leaves plenty available for export.
Higher domestic production in 2022 over 2021, and the re-opening of Ukrainian ports for wheat exports in late July, saw prices dip in October reported. Prices however began climbing again following news of Russia's pullout from the Ukraine grain deal.
Wheat futures rose to over US$9 a bushel on Tuesday, up from almost US$8.30 on Friday, . On Nov. 1, 2021, prices were under US$8.
"When prices move globally, so are the prices locally," Baron from the University of Toronto explained. "Luckily, given we are a very large player in the grain market ourselves and that supply chain cost in a local market are lower than in a global one, the relative price increase end consumers may face is not large."
Charlebois says that although Canadians may have to pay higher prices in places like the bakery due to Russia's actions in Ukraine, because we produce so much wheat ourselves, Canada won't fall victim to the kind of global food insecurity that could affect places like Europe, the Middle East and North Africa, which rely heavily on imports.
"With geopolitics, the problem is that there's lots of uncertainty and uncertainty will come at a price," Charlebois added. "So baked into the US$9 per bushel right now there's uncertainty, and uncertainty will force companies to pay more for grains, no matter where you are around the world."
With files from CNN and The Associated Press
