‘IT’S KIND OF TERRIFYING’
Higher prices for wheat and fertilizer straining nation’s farmers, could foster more global instability
While higher gasoline and crude oil prices are at the forefront of inflation concerns and economic tensions over Russia’s war in Ukraine, there are serious worries about the impacts of higher prices for wheat and fertilizers.
Those impacts are being felt by local farmers across the U.S., and could spark unrest globally via potential food shortages and spikes in bread and grain prices.
U.S. sanctions against Russia over its invasion of Ukraine include a ban on exports of oil, as well as commodities, including agricultural products.
Ukraine and Russia produce as much as 30% of the world’s wheat, according to various estimates. Russia’s invasion of Ukraine and its distribution hubs, and U.S. and NATO economic sanctions on Moscow, including commodities, has sent wheat prices skyrocketing.
“Wheat prices, they’re going through the roof,” said Anne Alexander, an economist and vice provost at the University of Wyoming.
Higher prices or global shortages of wheat could spark economic and social unrest in global hot spots, Alexander said.
Wheat prices in the U.S. have approached $13 per bushel. The price of the key commodity is up more than 75% from a year ago, according to Trading Economics. Prices of other commodities, such as coffee, oats and cotton, are also up significantly as global supply chains and persistent inflation challenge consumers.
Those are poised to push inflation and already higher prices at grocery stores even higher.
Historical precedents
Alexander said droughts fueled higher wheat prices — and, in turn, bread and food costs — that sparked the Arab Spring uprisings between 2010 and 2012. That unsettled regimes in Egypt, Tunisia, Libya and Bahrain, and saw the start of the bloody civil war in Syria.
She worries a global shortage or spike in wheat, grain and bread prices could stir similar unrest in international hot spots and simmering developing countries. “There could be some political instability that emerges,” Alexander said.
That could add even more tension to a situation where a worst-case scenario for Russia’s invasion of
Ukraine is a World War III situation involving nuclear powers.
“It’s kind of terrifying on a number of fronts,” Alexander said, pointing to the Middle East and North Africa, where Egyptian officials were already imposing price limits on state-subsidized bread.
Bread and grain prices have also risen significantly in Pakistan, India and sub-Saharan Africa.
Alexander said economic and social tensions could also rise in southern Europe, where there is a history of instability and ethnic and religious rivalries, as well as lower income levels.
Alexander said even during the Cold War, the U.S. and then Soviet Union traded commodities, including wheat and corn. “That was one of the only things we traded with them,” she said.
Bread shortages, higher wheat prices and inflation have also sparked major uprising throughout history — including the French Revolution and the rise of Adolph Hitler and the Nazi Party in Germany. Riots over bread shortages and prices helped spark the Russian Revolution in 1917.
Timothy Duy, an economics professor at the University of Oregon, said the long-term historical impacts of the current inflation wave and global tensions still need to play out politically and economically.
“I don’t know if we are deep enough into it to have those kinds of impacts,” Duy said.
He does see some parallels with energy-induced high inflation during the 1970s and early 1980s. Those included supply chain issues, and higher prices for crude oil and natural gas.
“The economy was rocked by repeated supply shocks,” Duy said.
Duy said U.S. sanctions against Russia have the potential to drive up prices and cut supplies of a number of key commodities, including oil, wheat and minerals such as titanium that are used by manufacturers and technology firms.
He said robust consumer demand in the U.S., helped by rising housing and stock market prices, is a driving factor in the current inflation wave.
Hitting farmers and truckers hard
Gas prices have risen more than 50% over the past year, according to AAA’s Fuel Gauge Report. Fuel prices have increased 20% the past month, with U.S. tensions with Russia over the Ukraine invasion adding to the current inflation wave.
Diesel prices are also up 62% since last year, and average more than $5 per gallon nationally. Diesel prices are averaging more than $6.28 per gallon in California, more than $5.34 per gallon in Oregon and more than $5.41 per gallon in Washington state, according to AAA.
Those higher prices strain truck drivers, and put additional upward pressure on costs on farmers and other producers, and eventually retail prices.
The rise in gasoline prices has prompted calls for gasoline tax holidays by some business groups and advocates on both sides of the partisan divide.
“Anything would be helpful,” said Lauren Smith, director of government affairs for the Oregon Farm Bureau.
Smith would like to see Oregon consumers, farmers and small businesses get some relief from either the state’s 38-centsper-gallon gasoline tax or the 18.4-cents-per-gallon federal fuel levy.
The Democratic administration of President Joe Biden also continues to see pressure from Republicans and business groups to open up more domestic oil drilling and energy exploration.
Fertilizer spikes
Smith also said persistent and now Russia and Ukraine-driven inflation are stressing some farmers to the edge. “There’s inflation on everything that they buy,” she said.
That includes some significant price increases for fertilizers.
“Russia is one of the largest producers of fertilizer,” Smith said.
Russia’s $9 billion fertilizer market is a top exporter of products and raw materials used in the compounds, according to the United Nations.
Prices for the raw materials for fertilizers, as well as fertilizer products, are up as much as 40% since Russian forces invaded Ukraine in late February.
Smith said it’s just another hit for farmers.
“It’s been a tough couple of years prior to all this with the pandemic and continuing droughts,” Smith said.
Vanessa Corriher-Olson, an agricultural research specialist at Texas A&M University, said farmers may look at skipping fertilizing fields because of excessive costs, or they may go with cheaper or alternative options, such as poultry litter.
That runs the risk of lower crop yields, especially in drought areas such as the American Southwest and Northwest.
Globally, the rise in fertilizer prices sparks worries about food insecurity and worsening crop yields already hit by drought or the impacts of climate change.
The U.S., Brazil and other countries are looking to bolster domestic production of fertilizer to help ease prices and potential shortages without exports from Russia and ally Belarus (which has also been sanctioned by the West). Belarus has a $2.9 billion fertilizer export market.
The Biden administration has announced a $250 million grant program for new sustainable and innovative fertilizer production in the U.S.