The Western nations' sanctions against Russia and the conflict on the territory of Ukraine have sent commodity markets' prices sky high and resulted in inflation levels hitting three-decade highs.
Consumer prices in the US soared by 8.5% with other countries around the world facing similar issues. All eyes are currently on energy markets – due to rising demand, US ban on imports from Russia and EU threats to do the same sometime in the future, the gas and oil prices are on the rise thus driving transportation and energy costs for companies and consumers alike.
Looming Threat
However, one of the biggest knock-on effects of the current situation currently looms over another market – the market for food, The Telegraph pointed out. The consumer prices index and the retail prices index skyrocketed to 7% and 9% in the UK in March compared to last year.
These increases pale in comparison to the Producer Price Index, which showed 19% inflation in March for materials used in the production. This index indirectly forecasts the consumer inflation as most producers will pass on the increased costs to their clients.
The price of materials, specifically agricultural products and fertilisers needed to produce them, is bound to skyrocket in the near future, because supplies from the two countries responsible for one-third of their export – Ukraine and Russia – have been called into question. Ukraine's ports, the primary route for Ukraine's agricultural exports, are blocked, and Russian ships carrying the same goods have been recently banned from most if not all European ports.
Global food prices have already jumped over 10% last month compared to a year ago. The farmers are paying exorbitant prices for nitrogen and phosphorous-based fertilisers after their supply waned in the wake of the Russian special operation and Western sanctions slapped on the country for it.
Permanent High Prices?
Replacing these volumes of crops, animal stock and other agriculture products supplied by Ukraine and Russia are no easier than finding replacements for Russian energy resources. So it's likely that the cost of food is going to rise rapidly in many countries, along with energy and fuel prices, and will probably say that way for quite some time, Axios' experts suggest.
Speaking about the American economy, they noted that the current high levels of inflation will dissipate over time. However, the high prices brought about by it since the end of 2021 will stay. The previous period of relatively cheap prices was ensured by "technology, productivity and cheap labour", but that balance has since been disrupted by supply chain disruptions and workforce shortages in the US, Axios alleged.