Welcome to the MultiLateral Data View. This week we’re focussing on wheat and vegetable oils. Why? Because we’ve seen vegetable oil and wheat prices spike in the last few weeks. They’ve been rising for a while in international markets on the back of supply chain issues that happened well before Christmas 2021. But what we’ve seen in the last few weeks because of the Russia and Ukraine crisis, are prices spiking to levels that are beyond where they were even as far back as 2008. So there’s a real concern in international markets that the Russia Ukraine crisis will create issues in food supply chains around the world. Why? Because the USA is obviously the largest exporter of wheat and oilseeds and vegetable oils but Ukraine and Russia control critical parts of all of this.
If we look, for example, at cereals data, as we’ve said in previous sessions, Russia has become important as a provider of cereals and has in fact overtaken the USA moving towards being the dominant provider. What we’re talking about is something that is quite literally the bread and butter of world trade. The flour and the cereals that we use in our food, that we feed our animals with, and that we also use to create margarine and spreads for our bread.
Now, something very strange has happened. In Germany, there is a new concept that has come out into the global news over the last couple of years, since the Covid pandemic, and it is the word ‘Hamstern’. What hamstern means is quite literally panic buying stuff in order to make sure that there are enough supplies. So we’re seeing a crisis of hamstern right now in Germany particularly around flour and around vegetable oils. There are real shortages which are apparently appearing in German shops because of concerns around the supply of wheat, flour and so on. What’s interesting is that if you look at maize, buckwheat, millet and canary seeds that go into typical german bread recipes, and then also into rye, you can see how important Ukraine is as a provider of these products for Germany. Russia is there as well but Ukraine is actually more important as a provider and this is something that’s causing these shortages in German shops.
Again if you look at sunflower oil and sunflower seed, Ukraine is actually the third-largest importer into Germany, so again this helps to explain why there’s a crisis. There is also a high level of vulnerability to eastern Europe in general. Ukraine, Poland and a lot of the products that come into the Netherlands are shipped in from abroad and then transferred over into Germany. So you can see that there’s a very strong reliance on goods in these sectors that are coming in from eastern Europe and Europe generally. Big concerns around supply chains and how these are going to work.
Now if we take this further, you can see why Russia is important by looking at all the partners that Russia has in terms of cereals and in terms of animal and vegetable fats. Germany is important for Russia but it’s actually relatively small compared to Turkey, Egypt Azerbaijan, Kazakhstan, Uzbekistan. Again as with previous patterns of trade you’re seeing quite clearly here a pivot of trade to Turkey, Egypt and into the middle east and importantly as we’ll see in a minute, Africa.
Ukraine’s trading in the same sector is actually far more diverse but there’s something very interesting here as well and it’s the spike to China. Now, this spike to China explains why China is wanting to tread very carefully in its relationships with Russia and unequivocally support Russia in its activities in Ukraine. The reason why is because actually, China is increasingly vulnerable to the conflict in terms of wheat and flowers, and animal and vegetable stock coming into China. Again with Ukraine, you can see how important the Middle-East and North Africa is. India is important as well but you can see Ethiopia, Kenya and South Africa coming through as very important sectors for
Looking at Africa in particular now, we’ve seen Egypt is important but if you look at all of the intra-African trades, you can see that cereals and animal products are actually far less important for the intra-regional trade in Africa than mineral fields.
Africa is actually providing for itself very little in terms of foodstuff and is very low in terms of the traded products within Africa so it’s dependent on the outside world for its trade, particularly in foodstuffs. If you remove mineral fuels and just look at cereals, you can see that Zimbabwe and South Africa, has become more important as a producer.
Looking at South Africa you can see that we’ve got Zimbabwe and other countries within Africa like Kenya, Botswana and Eswatini who are important in intra-African trade in these sectors. So actually, there is scope and growth happening and there is a capacity potentially in Africa to start feeding the region as a whole.
Now, this is highlighted because actually there is a lot of trade that happens in cereal products. It’s just not big enough to feed Africa. But to end on something of a positive note, if you look at where Africa’s dependencies are in cereals, and in animal and vegetable fats, you can see quite clearly how important Russia and Ukraine are. This dependency is obviously of concern. You can see how important Russia has become in these products, particularly cereals, and by just looking at animal fats you can see as well that Ukraine becomes more important.
So why are we worrying about all of this? It’s because Africa actually has a
potential in terms of cereals, and in terms of animal fats, to start producing more, both to feed itself and potentially to solve some of the issues that might happen around global food chain supply chains, as well. Some of the countries that are producing this, are the breadbaskets if you like, of Africa. They could also become the breadbaskets of the rest of the world.
This is the bread and butter of world trade. It’s threatened at the
moment because of the Russia-Ukraine crisis. Let’s hope that we can step up to the plate and find a better way of resourcing our cereals as well.