The effects of the war on the supply chain are already evident and as the war continues, the situation for most countries will become more difficult.
As Ukraine suspends all exports in order to focus on military operations, Russia, on the other hand, is unable to export the quantities of cereals it normally exports due to international sanctions imposed on it, and shortages of global logistics chain but also large increases in prices of cereals and other agricultural products. Indicative only:
1. Ukraine supplies 60% of the corn consumed by EU countries and 26% of the wheat consumed by Indonesia.
By Trust Economics-https://trusteconomics.eu
2. Russia and Ukraine together cover 75% -80% of the world’s needs for sunflower oil, more than 10% of total cooking oil, about 1/3 of world exports of wheat and 1/6 of world exports of corn.
3. African countries import agricultural products from both Ukraine and Russia and problems have already emerged. Egypt, for example, the country that imports the most wheat in the world, has already canceled two wheat orders, one due to high prices and one due to a lack of supply, which is likely to increase the price of bread in the country. At the same time, however, Egypt announced that it will turn to other wheat markets, which is expected in turn to increase the pressure on its price again.
4. Lebanon, after the great destruction of the port of Beirut in 2020, which also hit the country’s main wheat warehouses, relies 60% on imports from Ukraine.
On March 7, the price of wheat on the Chicago Mercantile Exchange has risen more than 70% this year, with prices reaching $13 / bushel, the highest level since 2008. The price of corn has also risen by almost 30% since the beginning of the year, reaching US $7.5 / bushel, the highest level since 2012.
At the same time, Western sanctions on Russia will have significant inflationary effects on the global economy due to gas and oil, especially in Europe, as Russia covers 40% of the EU’s gas needs.
Typically, on March 7, the price of brent (and crude) oil per barrel had exceeded US $120, the highest point since 2008 and the price of gas at US $5.1 per Btu, the highest point reached the last quarter (Chart 2). These increases will have a major impact on electricity costs.
At this point, it should be noted that the big gain from the situation so far is the US and LNG exports, the price of which (about $51 per mmBtu) is almost ten times higher than the corresponding price a year ago. before with American companies in many cases preferring to reroute their orders from Asia to Europe, since the profit is greater even after the calculation of any fines.
The IMF warns that the Russo-Ukrainian war will create a recession in the world economy, the magnitude of which can not be estimated at this time and depends on both the duration of the war and the impact of economic and trade sanctions mentioned above. . What is certain is that the challenges and difficulties for the world economy are very great.
Finally, it is particularly important to note and assess that supply chain turmoil and inflationary pressures in the global economy had already begun about two years ago, with the outbreak of the Covid-19 pandemic. This means that the world economic system has not managed to balance and is particularly sensitive to any changes and upheavals, especially in a conflict between two countries with the above-mentioned productive characteristics and geographical location in which they are located.
