Why war and weather could push up food prices

The war and adverse weather conditions are currently driving up global food prices, particularly for grains. A recent drone strike by Ukraine on two of Russia's main grain export terminals in the Black Sea port of Novorossiysk has halted operations at these facilities, which together had a capacity of 15.6 million tonnes per year.

The conflict between Russia and Ukraine has also led to increased attacks on grain vessels, maritime infrastructure, and ports along the Sea of Azov and Kerch Strait. Meanwhile, the EU is experiencing record-breaking temperatures and drought conditions, which are projected to reduce wheat production by 7.5%, corn by 2%, barley by 1.5%, oats by 1%, and rye by 0.5%.

This combination of factors has led to a significant increase in food prices, with corn and wheat export prices on the Chicago Board of Trade exchange rising by 3.8-4% since Tuesday. The US and EU are the largest exporters of wheat, while Russia and Ukraine jointly account for 55% of global barley exports and 62% of corn exports.

The crisis primarily concerns the transportation of these products, as attacks on ports and the escalation of hostilities make it more difficult for ships to reach their destinations.