As a bakery, one resource that we heavily depend on is wheat. When there are issues in the supply chain or price fluctuations – we notice. One very topical issue that we are experiencing right now is the demand for wheat. The war in Ukraine has dramatically impacted global wheat supplies, among other things, and is therefore driving the price of wheat up. Plus, Ukraine and Russia together supply 1/3 of the world’s wheat (and 25% of Europe’s), so other wheat-producing countries, like Canada, have to pick up the slack.
We have a global wheat shortage on our hands.
Even before the war in Ukraine, the wheat industry was under stress. Many factors have contributed to the shortage of wheat over the last few years, and the war in Ukraine has just exacerbated the problem. Here are some of the main things that have had an impact on the industry:
Let’s go back a few years to the beginning of the COVID-19 pandemic. Remember the empty supermarket shelves, closed restaurants and people making their own sourdough starter? The COVID-19 pandemic has definitely had an impact on many different industries, the wheat industry being one of them. The lockdowns negatively impact sales, transportation, storage and labour markets, all of which have contributed to the global wheat shortages.
There have been changes in consumer behaviour due to increased food security concerns. Over the pandemic, the demand for wheat products actually rose because people were cooking more at home and buying non-perishables like pasta and cereals. Plus, we all know multiple people who started baking during the pandemic, meaning they needed to buy lots of flour. The demand rose, but production and accessibility were way down due to labour shortages and product transportation restrictions.
Energy costs are skyrocketing because of the supply and demand in the global energy market. There are many reasons for this, including climate change, which means globally, people are using more heating and air-conditioning than ever before. Demand is high, so therefore the price goes up. But what does this have to do with the wheat shortage? When the cost of energy increases, it puts pressure on wheat farmers who need energy for operating machinery and irrigating crops. Fertilizer prices also go up for the same reason. These high prices can cause immense strain on farmers meaning lower wheat production.
Another major contributor to the global wheat shortage is environmental factors. Growing conditions and planting/harvesting seasons are changing due to changes in the weather. According to the World Meteorological Organization, climate change is contributing to an increase in natural disasters and more droughts, fires and flooding than ever before. These have been devastating for the agriculture industry as a whole, including wheat.
China is the world’s largest producer of wheat, and the severe flooding in the country has made it the worst season for wheat in decades. Because of this, they’ve had to delay planting a third of their usual crop. With an average of 134,254,710 tons of wheat typically produced each year, this is a HUGE decrease in supply. With such an immense shortage of wheat, not only do they not have enough to export to other countries, they are having to import wheat, taking from the supply from other countries. This is dramatically impacting the global wheat supply, and there is no way of knowing when that will change.
Even with the above factors contributing to the global wheat shortage, it’s never been as bad as it’s been since Putin invaded Ukraine. Russia is the third-largest producer of wheat in the world, and Ukraine follows closely behind. Russia has blocked the black sea for Ukrainian exports, and Ukraine lacks the rail cars to transport food over land. So, they can’t export the wheat they currently have, and with farm labourers being conscripted to the military, there is no one to work anyway.
Ukrainian farmers are also about to miss their planting season, so even if things change, there will still be no wheat crop any time in the near future.
Countries like Armenia, Turkey, Egypt, Iran, and Mongolia import most of their wheat from Russia and Ukraine, so they need to find other sources. Smaller countries like Eritrea, Mongolia and Kazakhstan will struggle to compete against large buyers like Bangladesh and Turkey since they won’t have enough money to outbid them on food supplies.
So, we know what’s causing the global wheat shortage, but what does that mean for consumers and the planet?
The most obvious way we are feeling the impacts of the wheat shortage is the price increase. Since the war in Ukraine began, wheat prices have increased by 37%, which is expected to continue to rise. This is bad news for businesses in the food industry, especially bakeries like us, who rely so heavily on wheat. It costs more for us to purchase ingredients, putting us into a tight spot as we don’t want the price increase to be felt by our customers. But the reality is that you could see prices increase across many food service businesses if the cost of wheat continues to rise.
An even more sombre fact is that the shortage of wheat is leading to a rise in the global hunger rate. The United Nations stated that the war in Ukraine’s impact on the global food market is directly contributing to a rise in the world’s hungry population. And that’s after it was already up 18% over the pandemic. Bread is often a staple food for food subsidies in poor African and Arab countries, but with the price continuing to rise, governments don’t have the resources to provide the mass amount of food needed.
The United States, Canada, Argentina and Australia already have tight wheat inventories as it is. But with countries unable to purchase their wheat from Russia and Ukraine, they are seeking alternate options. Countries that do produce wheat are feeling the pressure because of the high demand and the potential to monopolize on that.
Lack of wheat doesn’t just mean that loaves of sourdough bread will be more expensive. There is more of a domino effect than that. Ukraine can’t sell their wheat; farmers can’t plant new crops or harvest current crops, which will lead to them being waster. Plus, millions of Ukrainians are fleeing the country or being enlisted to join the military, meaning that there is no one to work the fields, even if they could find a way to export the wheat. This will inevitably have a long-term impact on the economy.
It’s impossible to predict the long-term implications of the global wheat shortage or how long this situation will last. It’s entirely out of our hands. But all we can do is continue to do our best with the resources we have so that we can continue to supply fresh bread and baked goods throughout this shortage.
