Russian invasion could trigger ‘largest wheat shortage’

Russia’s invasion of Ukraine could devastate global grain markets so deeply that it’s likely to be the biggest supply shock in living memory, according to Scott Irwin, an agricultural economist at the University of Illinois.

Tens of millions of acres of grain production are at stake, he said. “I am convinced it is going to be the biggest supply shock to global grain markets in my lifetime,” Irwin wrote on Twitter.

The world “desperately” needs farmers to plant more acres in 2022, he said, but “basically nothing can be done in the short-run except to run up the price of grain high enough to ration demand.”

Ukraine and Russia together account for more than a quarter of the global trade in wheat, as well as a fifth of corn sales. Prices for those staple crops are soaring on concerns over supply disruptions at a time when global food prices had already reached record highs.

Even before Russia’s war with Ukraine, food inflation was already plaguing global consumers. Extreme weather has made it harder to grow crops, while a shortage of workers and higher shipping costs snarled supply chains.

The world’s grain inventories are also very tight, so any prolonged disruptions to supplies from Russia or Ukraine has the potential to dislocate markets for years to come.