Europe’s next economic pressure point.

Europe’s next economic pressure point  will be food price inflation and it will impact for a minimum of two years.
We reported earlier that costs of wheat related products could increase materially but felt that third party suggestions of 20% rises were unduly alarmist as the Food and Agricultural Organisation insists that world grain stocks, especially those held by major exporters, are sufficient to cover shortfalls after two consecutive years of record harvests.
However, with temperatures hovering around 38 degrees having brought drought to an area three times the size of Luxembourg in central and southern Russia, and wildfires across the region killing at least 50 people and devastating villages, farmland, forest and infrastructure has lead to President Putin announcing an export ban as wheat as yields are expected to fall by more than 20%.
Speculators will be pushing prices higher as other areas are experiencing poor growing conditions most notably Canada and Poland which will only exacerbate international shortages
.
Analysts say Europeans and Americans may end up paying slightly more for their bread in the coming months, but the biggest impact will be felt in poorer, importing nations in the Middle East, Africa and parts of Asia.
Unless heavy rains are experienced in Russia in the next 8 weeks they will be unable to plant next year’s crop and this is why the problem could easily last 2 years.

 

 


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