Traders warned of rising food prices due to escalation in Donbass

The escalation of the conflict between RUSSIA and Ukraine will lead to an increase in world food prices, which are already close to multi-year highs, analysts and traders have warned. This is due to the fact that importers will have to look for alternative supplies due to the conflict between two large exporters.

The aggravation of Russian-Ukrainian relations may lead to a further increase in world food prices, which are already close to multi-year highs, REUTERS writes with reference to analysts and traders. This is due to the fact that the two countries are large producers of grain crops, the agency notes. The escalation between them will force buyers of wheat, corn and sunflower oil to look for alternative supplies, which will cause prices to rise, experts say.

Ships avoid entering the Black Sea due to military risk, so supply disruptions are already happening, a Singaporean trader told the agency.

Russia and Ukraine account for about 29% of world wheat exports, 19% of corn supplies and 80% of sunflower oil exports. Traders are concerned that any military intervention could affect supplies and provoke importers to scramble for alternative supplies, Reuters writes.

In 2021, about 70% of Russian wheat exports went to buyers in the Middle East and Africa, according to Refinitiv.

Chicago futures for wheat on February 22 at 22:00 Moscow time grew by 5.6%, corn reached a seven-month high, and soybeans also rose in price, the agency writes. All three key food and feed ingredients are up about 40% from their 2021 lows, the agency said.

World food prices are already hovering near 10-year highs, helped by strong demand for wheat and dairy products, the UN food agency said late last year.

Agricultural markets are further supported by rising crude oil prices , as well as the growing use of agricultural commodities for the production of alternative fuels, writes Reuters.

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On February 21, Vladimir Putin recognized the independence of the DNR and LNR. On February 22, the Federation Council supported Putin's appeal on the use of the Russian military abroad. In his appeal, he referred to the treaties of friendship, cooperation and mutual assistance with the LNR and the DNR. The President also clarified that Russia recognized the republics within the borders of the Donetsk and Luhansk regions. Most of their territory is under Ukrainian control.