At the recently concluded G20 finance ministers’ meeting, the participants agreed to work on the global food shortage and spiraling food prices. There have been concerns about a global wheat shortage after Russia invaded Ukraine. Now, many fear that the wheat supply crisis might also lead to a flour shortage in the U.S.
There has been a crisis of sorts in the global food supply chain. From the COVID-19 pandemic, the Russia-Ukraine war, crop destruction due to adverse weather conditions, cases of bird flu, and a spike in demand, multiple issues have hit the food supply chain. It has been a perfect storm for the food supply chain. Vulnerable populations in some emerging economies and Africa have been battling food shortages as well.
Global wheat prices have come off their 2022 highs.
Global wheat prices spiked after Russia invaded Ukraine. Together, both of these countries accounted for over a quarter of global wheat exports in 2020. To make things worse, there were export restrictions in Kazakhstan, which is a major wheat exporter.
Also, India, which was expected to step up its exports this year and meet the shortfall arising from the Russia-Ukraine conflict, put restrictions on wheat exports. However, wheat prices have come off their highs, Kazakhstan extended the export restrictions, and India added flour to the wheat export ban.
The U.S. is self-sufficient in its wheat needs.
While the U.S. imports a lot of food exports, it's self-sufficient when it comes to wheat. While the country’s share in global wheat exports has fallen, it's still among the top three exporters, according to the U.S. Department of Agriculture.
The country does import some wheat, mainly from Canada, but the volumes are quite low. The U.S. imports have averaged around 1 million metric tons of wheat flour and products annually, which is small compared to the annual national consumption.
There isn't a flour shortage in the U.S. in 2022.
While some people might have faced trouble buying flour at a grocery store, there isn't a nationwide shortage in the U.S. Flour is available on Walmart’s e-commerce platform as well as on Amazon. However, some countries that rely on wheat and flour imports have been witnessing a shortage. Also, some countries like Sri Lanka are facing an economic crisis and are short of foreign exchange to buy food products.
U.S. flour prices have risen in 2022.
U.S. CPI inflation rose at an annualized pace of 9.1 percent in June, which was the highest level since 1981. For two consecutive months, U.S. inflation has exceeded analysts’ estimates and has continued to rise despite the Federal Reserve’s rate hikes.
Looking at the inflation release, prices of food products increased 10.4 percent annually in June on a seasonally unadjusted basis while flour prices increased 19.2 percent, which was among the highest among all food products. Also, on a monthly basis, flour prices rose 5.3 percent in June, which is way above the 1 percent food inflation for the month.
The fall in global wheat prices hasn't been reflected yet in U.S. flour prices. While falling wheat prices would eventually lead to lower flour prices, there's little denying that companies, whether they're in food or energy, have also been profiting from the rising inflation by raising prices much more than the input cost inflation.