Are you frustrated with the prices of consumer goods during this time of record inflation? You are not alone, and your frustration is probably just going to get even more intense. Get ready for an even bigger hit in the aisles of your grocery store.
While Russia keeps bombarding the streets of Ukraine for a second month, the rate of inflation is likely to see another hit in the cost of essential goods.
Before the war and the sanctions that immediately followed, Russia was a world leader in wheat exports. It brought in billions of dollars a year and they supplied almost one-fifth of the world’s grain. You add to that Ukraine’s position as a world leader in grain exports and you can account for one-fourth of the world’s wheat exports. Now that these two nations are in a major conflict, they are both keeping their products for their own needs.
Ukraine just announced that they will have to stockpile their wheat due to the impact of the war on their nation. And Russia has stopped exporting their wheat so that they can protect their food market due to the worldwide sanctions.
So when the world’s supply of wheat is suddenly cut by 25% in just a month, the prices of the wheat that is available are dramatically rising. So, consumers are going to have to tighten an already tight belt economically.
What makes this situation crazy is that the farmers who do have grain are having a hard time finding buyers because the volatility has created such an increase in the futures market of the commodity.
If that is hard to understand, you are not alone. Brad Schaeffer is a commodities trader and he explained the situation to The Daily Wire.
“It would seem good for [farmers], right? Because if you have something that’s gone up, in this case wheat… in theory they should do quite well. But they have to be able to offload it, and right now, that’s been the difficulty.”
To put it simply, the precarious nature of the market price of grain has left buyers suspicious about buying a product that could lose half its value by the time they get it. So, farmers have a needed and expensive product that the world needs right now but no one wants to buy.
It’s not just wheat that faces this crazy issue, but fertilizer prices have also shared in the volatility caused by the war in Ukraine. Supply chains have been disrupted and the demand has gone up and down.
In the past, Russia supplied 10% of all fertilizer for the American farmer, but now those exports have been shut down by the United States. So farmers now have to pay sometimes five times more for their fertilizer.
All these things will certainly impact other products. Joel Griffith from the Heritage Foundation wrote, “When you see Russia or Ukraine constrict the exports of fertilizer, that’s going to drive up prices on production across the globe. And we’re already seeing big increases in food.” He went further saying that if we don’t have the fertilizer, the prices of corn and beef will certainly rise. It will have a ripple effect across the whole food supply.
So what does this mean for you? Food companies are now offering smaller portions without smaller prices.
Gatorade presented a more “aerodynamic” bottle that reduced the size from 32 ounces to 28 ounces. The price is still the same. A bag of Doritos will have about 5 fewer chips in it but still cost the same.
This trend will continue in every aisle of your grocery store.