Russia-Ukraine crisis: Global wheat & corn supplies at risk

There is lot of uncertainty around what will happen as the Russia-Ukraine conflict worsens. The crisis has roiled global markets in the recent days, sending oil prices higher. There could be other consequences as well, as the fear is that the crisis could stoke inflationary pressure too. But, all of this depends on the extent to which the supply chain would get hit.

Production in Ukraine and Russia has already been affected, resulting in aluminum and other metal prices shooting higher. Aluminium prices in London have hit a record high, rising 5 per cent so far this week, and 11 per cent Month-on-Month. Russia is a major metals producer, and after Moscow’s invasion of Ukraine, investors are worried about supplies from Russia as there would be an impact on production.

Europe and the United Kingdom have imposed sanctions as well, and more are likely on the way. Aluminium and nickel are energy intensive metals and higher energy prices would further push the cost curve. Palladium prices too have surged. Russia is the world’s third-largest producer of gold, and Moscow-based Norilsk Nickel is a major producer of palladium and platinum. Spot palladium rose 2.7% to $4,549.01 an ounce, and platinum gained 1.2% to $1,104.50.

Ukraine is one of the world's largest exporters of grains - wheat, corn, and barley, and Russia is the largest wheat exporter in the world. Together, Russia and Ukraine make up 30 percent of global wheat exports. Disruptions to any of this could lead to disruptions in the commodities markets, pushing up prices eventually at the grocery store. So far this week, international wheat is already costlier by over 15 per cent.

Ukraine also accounts for around 13% of global corn exports, is the fourth-largest exporter in the world and Europe's largest, by some way. Half of its exports go to the EU, with China another major importer. The corn is used in animal feed, with the biofuel sector also taking a significant share. Ukrainian corn prices too have shot up by 6 per cent this week, on the back of fears of supply disruption.

For now, Brent crude is consistently holding above the $100 a barrel mark. Russia is one of the biggest oil and gas producers in the world, and any disruptions will have a major impact on prices. Ukraine is a critical route for oil flows into Eastern Europe and to the European Union countries. The country also remains a key transit route for Russian gas to Europe. The Oil price surge, if it lasts too long, could dent growth prospects, and drive up inflation.

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