Rice is a familiar but especially important product, helping Asia to limit economic losses caused by the military war of Russia – Ukraine.
Jules Hugot, an economist at the Asian Development Bank, said rice is preferred in Asia to wheat, which is facing a serious shortage as one of the top suppliers is threatened by conflict and sanctions. Rice prices are relatively stable and can be substituted for other staples.
“These are all sources of starch and there are substitutions between them,” said Hugot, adding that although Russia’s military campaign in Ukraine has doubled the price of wheat, the price of rice has only increased by about 20%.
Russia and Ukraine account for a quarter of all wheat exports worldwide. This is an ingredient used in everything from bread to pasta and animal feed. The conflict has closed ports in Ukraine while trade with Russia has been stifled by sanctions. Rising prices have pushed food inflation around the globe and caused concern in countries that depend on foreign food.
However, Hugot said Asian consumers will find alternatives to trade flows disrupted by conflict. They can buy wheat from Kazakhstan and palm oil from Southeast Asia to replace the sunflower oil shipments from the Black Sea. The full diversification gives the area more options.
As a result, inflation will also be relatively contained in Asia, especially thanks to the popularity of rice and a significant drop in pork prices as China re-develop the world’s largest pig herd. Supply chains have also become more resilient in the wake of the pandemic, and countries are pursuing diversification as an important strategy to increase food security.
At present, no one can determine how long this condition will last. However, many fear the conflict will cause Ukraine to miss the time to plant corn and sunflowers in the spring. This will cause a supply shock in the global market in the long term.
It also puts pressure on fertilizer and causes the price of this commodity to increase in the face. According to Mr. Hugot, India is highly dependent on imports and the disruption of trade flows from Russia, the leading fertilizer producer. This situation will have a significant impact on the nation of billions of people, India.
Not only food, but the crisis in Ukraine is also causing the prices of other commodities to rise at a dizzying rate on a global scale. Brent oil price sometimes reached 140 USD/barrel in the trading session on 7/3 before falling back below 130 USD/barrel. However, prolonged tensions between the US and Russia could drive oil prices even higher. Many experts believe that the US is about to issue an embargo on Russian oil imports.
Because of Western sanctions, the prices of many key Russian exports have also skyrocketed. Along with that, gold also increased sharply.