How the Russia-Ukraine conflict is affecting the baking business in Africa

Effects of the Russia-Ukraine Conflict on Wheat Supply

Russia and Ukraine are major exporting countries for wheat and together represent 25% of globally traded wheat. While farmers in Ukraine are currently unable to sow seeds and tractors are used in the war, not only a humanitarian but also an economic catastrophe is looming for Africa.

Russia and Ukraine primarily export wheat to Africa, Middle East, and Asian countries. While many scenarios are possible, current estimates indicate that only 50-70% of the wheat will be harvested in 2022.

After accounting for domestic consumption, this points to a shortfall of 1-2% of global wheat production or roughly 8-15 MMT. We expect this shortfall to be met by wheat from, among others, India, Australia, Europe, the US, and Canada.

Africa is a net importer of wheat, and countries such as Egypt, Sudan, Nigeria, Kenya, large wheat volumes from Ukraine and Russia.

Wheat prices affected by Russia Ukraine conflict
Global supply chain disruptions and it’s effects on the cost of wheat

Global supply chain disruptions and it’s effects on the cost of wheat

While the Ukraine-Russia conflict has definitely made the stuation worse, the issues of volatile wheat supply, quality and prices have been there even before and are bound to still be there once the conflict is resolved. Supply chain disruptions exacerbated by the pandemic and harsh droughts, such as those in North America that resulted in a 30% reduction in their production, have also been adding to the surging prices Supply decreased by 5.4% in the 2021 season which in turn initiated a new downtrend. The 2022 season forecast predicts a further 10.0% decrease. If realized, the continued downtrend will induce an upward price pressure (Mintec, 2022).

This key global comodity’s quality and supply is also affected by numerous other factors . For example, in Australia, the quality profile of the crop was impacted by a wet harvest. This resulted in a high proportion of the crop being downgraded to low protein and feed grade wheats (ABARES- Department of Agriculture, Water and the Environment, Australia Government, 2022).

The cost drivers for wheat are currently up-trending which provides an upward price pressure. The shortage in wheat sources aggravated with varying wheat qualities and lower baking performance affects baked products quality, results in difficulties of manufacturing a large range of flour types and managing production costs. This will not the specific application requirements.

Beyond the specific baking ingredients, we face an overall high-cost world environment for the coming year. With bread as a staple commodity, this price pressure has economic, social, and political implications. As a key player in the baking community, we see it as both our duty and our privilege to work together with our partners, to help build more across the globe.

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Food Review May 2022

Read about the latest trends, tools and technology to hit the South African F&B manufacturing industry in the newest issue of Food Review. Snack on the new confectionery ingredients and equipment on the local market or find out about the best packaging options available. Plus, explore the innovations helping to keep food and beverage manufacturing...

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