Fears of supply shortages and conflict-driven disruption following Russia’s brutal invasion of Ukraine have caused hair-raising spikes across oil and gas benchmarks, with gold prices also rallying as spooked investors flee to safe havens.
The knock-on effects are also – literally – being felt further down the food chain, amid escalating worries over wheat supplies, with Russia and Ukraine exporting around 29 per cent of the world’s supplies.
While the UK produces around two-thirds of its own wheat consumption, global shortfalls have global consequences and affect all markets.
Prices spiked to 14-year highs in the US at 1348 cents per bushel, and broke records in France – jumping to €385 per tonne. Domestically, prices have risen to a record £281.90 per tonne, with May contracts soaring north of £300.
Saxo Bank’s Ole Hansen said: “From a global food security perspective, this is a very serious development as wheat together with rice are two of the most important food staples.
In particular, the rising prices could spell bad news for UK supermarkets and the hospitality sector, with elevated concerns over food staples dependent on grain.
Alex Waugh, director of UK Flour Millers, revealed foods as far ranging as eggs, meat, and bread could suffer price hikes over the coming months.
He said: “This is likely to lead to a higher level of UK food price inflation, sustained over a longer period than had already been anticipated.”
With households already bracing for an £180 hike to their annual grocery bills, further financial pressure will be unwelcome news for shoppers.
UKHospitality (UKH) chief executive, Kate Nicholls, told City A.M. the country’s pubs and restaurants will also feel the pinch from rising prices,
Nicholls suggested popular courses “such as pasta, as well as beef and chicken” could be affected, while the “increase in the general grain price affects animal feed as well.”
The British Institute of Innkeeping (BII) boss Steve Alton also feared wheat price pressure will “undoubtedly create further inflation” in pub supply chains.
Summarising the difficulties, both UKH and BII have warned rising supply costs, alongside energy and tax hikes this spring mean venues are facing a perfect storm of obstacles on their route to post-pandemic recovery.
It could also mean pub-goers face further increases when buying a pint, with boozers having “little option” but to pass costs on.
This especially the case when combined with rising fuel costs, argued Susannah Street, senior investment and markets analyst at Hargreaves Lansdown.
She explained: “Just last month Heineken described the inflationary jump across the board as crazy, but now it seems as though the expected 15 per cent rise in costs for the company will be much steeper.”