March 30, 2023
Headlines from the Black Sea region continue to move markets more than a year after Russia’s unprovoked invasion of Ukraine. Recent analysis from U.S. Wheat Associates, the industry’s export market development organization, shows that the impact of Russian interventions in the market extends far beyond the current conflict and has been an underlying source of dramatic global wheat price volatility.
Over the years, Kansas wheat farmers answered the call to supply additional wheat to the world when the Russian government banned or restricted exports of wheat. However, with historically tight hard red winter (HRW) wheat supplies and Russia’s invasion of Ukraine, price volatility reached record levels last year, said Mike Spier, vice president of overseas operations with U.S. Wheat Associates.
“Russia’s government meddling clearly adds uncertainty and volatility in the market, and that does make it more difficult for Kansas farmers to market their wheat,” Spier added.
Every spike reveals Russian intervention
In six documented situations since 2007, when the global wheat market showed any sign of stress, the government of Russia stepped in to impose an export ban, export tax or export quota to isolate their home market. These actions intentionally limited world wheat importers’ access to Russian wheat supplies. This Russian intervention further magnified any supply shortage and accelerated the rise in wheat prices.
Twice in this time frame, Russian military aggression against Ukraine directly caused world wheat prices to spike sharply. The world is reeling viscerally and economically from the shock of that situation right now.
Consistent protectionism
“… We are closely monitoring prices for the most essential social goods such as food, including bread,” said Russian Prime Minister Mikhail Mishustin in early March about its domestic wheat supply. “Russian grain is in good demand from abroad, and its price is increasing. That said, it is necessary to provide the necessary raw materials, first of all, to the domestic baking industry.”
Mishustin made this comment with specific reference to the hyperreaction of global wheat prices to Russia’s invasion of Ukraine and the immediate impacts of the widespread economic sanctions levied on Russia in response. Yet it spotlights the core tenets of Russia’s protectionist — and heavy-handed — wheat supply and price control policies. Russian intervention has been front and center since the country first entered the global wheat export trade.