Prices Spiralling, Export Prohibitions Arising

Russia’s invasion of Ukraine has caused a worldwide food crisis. On Wednesday, Indonesia increased export controls on palm oil, entering a growing list of prominent producing countries that are trying to keep essential food supplies within their own borders.

Commodity prices have skyrocketed because of Ukraine’s conflict with Russia, which has threatened world grain yield, the availability of edible oils, as well as fertiliser exports.

A vast variety of foods and household items, such as biscuits, margarine, detergent, and chocolate, include palm oil—the most frequently used vegetable oil in the world. This year, the price of palm oil has increased by over 50%.

Indonesia’s Trade Minister Muhammad Lufti stated that they put the export restrictions in place to keep domestic cooking oil costs affordable.

Costs are rising at a time when countries are still struggling to recover from the coronavirus crisis, and this is contributing to an overall rise in inflation throughout the world. Besides providing a significant portion of the world’s wheat exports, Russia and Ukraine are major producers of edible oils.

Exports of grains, sugar, and meat have all been restricted until the end of the year, according to an announcement made by Ukraine on Wednesday.

Because of soaring fertiliser prices and shrinking supplies because of rising natural gas prices – a critical component in the production process for many products – the war has hampered exports beyond the Black Sea area. It is also jeopardising crop expectations.

UN Food and Agriculture Organization (FAO) data shows that food prices throughout the world grew by 20.7 percent year-over-year in February, a record high.

Soybean oil prices Bocv1 surged to a 14-year high following Indonesia’s decision, while Malaysian palm oil futures FCPOc3 hit an all-time high. At present, soybean oil costs have risen by over 40%.

In terms of worldwide exports, Russia and Ukraine account for over 80% of the sunflower oil produced in the world, leaving clients like India scurrying to find substitutes like palm oil or soy oil. This year, the price of Chicago wheat futures Wv1 has risen by over 60%, putting pressure on basic foods like bread.

According to the Chinese agricultural minister, China’s wheat crop is in the worst condition it has ever been in its history, which has worsened with the loss of two big exporters in Ukraine and Russia.

Drought-stricken areas of the U.S. Plains are expected to further limit supplies.

A week after Hungary prohibited all exports of grains, Serbia stated on Wednesday that it will impose a moratorium on the exportation of grains, including flour and cooking oil, as of Thursday.

Until it completes the planned acquisitions, Bulgaria plans to boost its grain stocks and, as a result, it may restrict exports for the time being.

International purchasers are looking for alternatives to Russia and Ukraine’s grain supply, which has led to a tightening of grain supplies in Romania, a key exporter.

Following a spike in natural gas costs, manufacturing fertilisers, which helps to increase agricultural yields, may also be reduced.

Ammonia and urea production in Italy and France will be reduced, according to Yara YAR.OL, one of the world’s top fertiliser producers on Wednesday.

Conflict is affecting food supply throughout the world, a Norwegian firm said last week.

Trade and industry officials in Russia urged Friday that fertiliser exports should be temporarily halted because of the country’s “special operation” in Ukraine, rather than calling it an invasion.