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16 Mar 2022

Econ Digest

Russia-Ukraine conflict drives up global wheat prices, affecting food costs and spending

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        The ongoing conflict between Russia and Ukraine, which are the world’s leading wheat exporting nations, accounted for 28.5% of the total global wheat exports, has driven up wheat prices to a record high in recent years. This has hit Thailand’s downstream industries that use wheat as a raw material, as Thailand’s wheat imports from Ukraine account for 13.1% of Thailand’s total wheat imports. KResearch expects prices of imported wheat to remain high over the next six months (March-September) because a new round of maize outputs in Thailand have yet to enter the market. This will lead to higher production costs for downstream industries such as human food and animal feed, or shortages of raw materials needed for production, which will ultimately lead to higher food prices for consumers on goods  such as meat, instant noodles and bread; simultaneously, inflation is at a high level and household purchasing power remains fragile.
 
        KResearch expects that the shortage of raw materials faced by wheat-based downstream industries may be alleviated in the last quarter of 2022, as the output of alternative crops such as maize will enter the market in large quantities, accounting for about 75% of total maize output for the year. This will help the downstream industries to have enough raw materials for production and reduce raw material prices. Increased maize supplies in the last quarter of 2022 will help ease the pressure on food costs for consumers, bringing them down gradually as compared to the previous quarters, while wheat supplies remain highly uncertain.

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