How unusual is it for two warring nations to reach an agreement in the middle of battle that has nothing to do with the war itself? Ukraine and Russia reached a deal that would allow the resumption of grain exports from Ukrainian Black Sea ports. Ministers from both countries signed an agreement brokered by the United Nations and Turkey in Istanbul. Obviously both nations are major exporters of grain and fertilizer and even in war, they do not want to give up on the lucrative exports.
In world forums the relevance of the wheat supply is directly related to hunger. The World Food Program (WFP) estimates that 47 million people have moved into a stage of acute hunger as a consequence of the Ukraine war. The deal will also allow the unimpeded access of Russian fertilizers to global markets, which explains why Russia is so anxious to sign a deal with a country it invaded. Russia is a major producer of fertilizers, which are vital to maximizing food production, which is why the world was so interested in getting this deal done.
Experts also link the supply of wheat to the ongoing rise in food prices. The New York Times recently wrote that China believes the U.S. and its allies are behind the rise in global food prices, but most analysts agree that Russia’s aggression against Ukraine is a key driver for the food inflation. Both Ukraine and Russia produce a third — or about 60 tons of the 200 million tons that the world needs. “The world cannot do without the harvests from Ukraine and Russia. Their amounts are simply too big,” commodities analyst Wolfgang Sabel says.
High wheat prices are especially devastating for areas that are already being hit by global hunger. “In these countries, people spend between 60% and 80% of their disposable income on food. If bread becomes double as expensive because wheat has surged from €200 to €400 per ton that has an impact,” Sobel says (per Deutsche Welle).
The big question is how these developments are affecting food prices in the U.S. where food prices are rising at historic levels. Prices for commodities like wheat and corn are at their highest levels in a decade. What’s more, the U.S. Department of Agriculture predicts that food-at-home prices will see an increase of up to 4% by the end of 2022 on top of the historic increases to date.
“It’s particularly severe because we are just coming out of a recovery from a two-and-a-half-year pandemic that had severe implications on the prices of goods and services as well as the price of commodities,” according to Johanna Mendelson-Forman, adjunct professor at the American University in the School of International Service.
Despite the prospect of continued rising prices, however, experts don’t expect food shortages to occur in the United States. The U.S. is its own breadbasket and doesn’t depend on imports from abroad. “It’s important to realize that the U.S. doesn’t import very much from Ukraine,” explained Joseph Glauber, a senior research fellow at the International Food Policy Research Institute.
“We may see some shelves that are empty for various kinds of food products like we have for a while now as we recover from the pandemic,” said Scott Irwin, chair of agricultural marketing at the University of Illinois Urbana-Champaign. “But I can say with some real confidence that in the United States, the average consumer is not going to see a shortage of bread because of what’s going on in Ukraine.” In other words, the US will continue to be its own breadbasket regardless of what happens on the world stage.
Here’s why! Wheat is not in short supply in the US. and ranks third among U.S. field crops in planted acreage, production, and gross farm receipts, behind corn and soybeans. In 2021/22. U.S. farmers are estimated to have produced a total of 1.64 billion bushels of winter, spring, and durum wheat from a harvested area of 37.2 million acres, up slightly from last year’s record-low production.
Wheat is the principal food grain produced in the United States. The three primary varieties of the grain domestically sown are winter wheat, spring wheat, and durum wheat. U.S. consumer demand for food products made from wheat flour is relatively stable and largely unaffected by changes in wheat prices or disposable income. However, demand is closely tied to population and changing consumer tastes and preferences.
The strength of the domestic market for wheat developed from a historic turnaround in U.S. per capita wheat consumption in the 1970s. For nearly 100 years, per capita wheat consumption declined in the United States as diets diversified to include substitute carbohydrates such as potatoes and rice. Wheat consumption dropped from more than 225 pounds per person in 1879 to 180 pounds in 1925 before bottoming out at 110 pounds in 1972. After reaching this low point, per capita consumption began to steadily rise, and by 1997, consumption had rebounded to 147 pounds per capita. The rise in consumption benefited the U.S. wheat processing industry, and the industry expanded and modernized.
Although the United States produces only about 6-7 percent of the world’s wheat, it is a major wheat exporter. While it recently ceded the dominant role in world wheat exports to Russia and the European Union, the United States routinely ranks among the top three global wheat exporters. Rising global populations and incomes, especially in low- and middle-income countries, encouraged the expansion of world wheat consumption and—concurrently—global wheat trade. Despite expanding global wheat trade, the U.S share of global wheat exports is trending lower, estimated at around 11 percent for the 2021/22 wheat international trade year (July–June).
While it is not a major exporter, it is even less of an importer. U.S. imports of wheat grain, mostly from Canada, are small but have grown from less than 0.1 million metric tons in the 1970s to an average of 2.6 million metric tons over the last 10 years. Imports of wheat flour and products have averaged nearly 1 million metric tons annually over the last 10 years. Wheat-product imports consist mainly of pasta and noodles from Canada, the European Union, and Asia..
Since 2000, the United States, the European Union, Canada, Australia, Argentina, and the former Soviet Union (including the three major wheat exporters Russia, Ukraine, and Kazakhstan) accounted for an average of 90 percent of world wheat exports. Prior to 2000, these exporters combined to represent 95 percent or more of world wheat exports.
The good news here is that while the world is in shock about the curtailment of wheat exports from the Ukrainian and Russian breadbaskets, the US breadbasket is secure.