Bread is a staple food for billions of people worldwide. As such, disruptions to the global wheat supply chain can have profound economic consequences, especially for countries that rely heavily on imported wheat.
With the war in Ukraine and extreme weather events exacerbated by climate change, the wheat market is currently facing enormous instability. Together, Russia and Ukraine supply around 30% of globally traded wheat. Sanctions on Russia coupled with blockades of Ukraine’s ports have significantly reduced wheat exports from these major producers.
For nations like Egypt, Lebanon, Tunisia, and others that get 50% or more of their wheat from Russia and Ukraine, the supply shock has been devastating. With less wheat available, prices have skyrocketed. The UN Food and Agriculture Organization reports that wheat prices were up 22% in March 2022 compared to the previous year.
Higher wheat prices drive up costs for wheat-based foods like bread, pasta, cereals, and bakery items. This fuels inflation, reduces consumer purchasing power, and threatens food security. Poorer households spend a larger portion of income on food, so they are hit hardest by the price spikes.
To keep bread affordable, governments may subsidize wheat and bread prices domestically. This strains government budgets. Egypt recently doubled its bread subsidies, costing $130 million more per month. High wheat prices are estimated to cost Indonesia an additional $1.5 billion in wheat subsidies this year.
With less money available for other priorities, countries also face slower economic growth. The African Development Bank Group decreased Africa’s economic growth projection for 2022 from 4.5% down to 3.8%, citing the war’s impact on food costs.
When countries cannot access or afford needed wheat imports, they are forced to tap into domestic wheat reserves. Drawing down food stockpiles leaves less of a buffer should future shocks occur. It also reduces confidence in local food security.
Wheat supply uncertainty can encourage countries to implement protectionist policies like export bans. India and Argentina have restricted wheat exports to prioritize domestic needs. While understandable, export limits mean even less wheat circulating globally.
Going forward, diversifying the sources of wheat imports could help import-reliant countries increase their supply security. Longer-term food security investments like increased domestic wheat production, improved storage and distribution infrastructure could also strengthen resilience.
Ultimately, disruptions to the global wheat supply chain spotlight the tight interconnectedness of the world’s food systems. When major wheat exporters face crises, it can quickly threaten the food security and economic health of nations worldwide. Establishing more robust, diversified food production and trade will be key to building economic resilience in the face of shocks like the Ukraine war.