How is the Ukraine war affecting the cost of ingredients?

Ukraine, the “breadbasket of Europe”, has over 107M acres of agricultural land, with an area larger than Italy currently under cultivation. Prior to the invasion by the Russian Federation in February 2022, Ukraine was a major global producer and exporter of key commodities, with a top-10 global market share by volume in each of wheat (10%), barley (13%), corn (15%), and sunflower oil (50%).

Almost as soon as the first Russian troops crossed the border, the UN’s Food and Agriculture Organisation (FAO) expressed its concern about the war’s impact on global agricultural commodity prices – and the news soon hit the headlines of the global press.

For many, it was surprising to learn of Ukraine’s position as an agricultural global powerhouse. And the effect on key commodities of the war in Ukraine has been felt by Food and Beverage Buyers and producers, as well as consumers globally. Overall, the UN FAO expects food costs to have risen by between 8% and 22% in 2022 due to the direct effects of the war in Ukraine.

But what are the reasons for this?

1. Commodities formerly dominated by Ukrainian exports are more expensive due to diminished supply.

The simplest of economic dynamics, the law of supply and demand, has caused those commodities in which Ukrainian exports were a major global factor to rise dramatically in price.

While some prices seem to have settled over the course of the last 6 months, particularly since the Russian blockade of key Ukrainian ports was lifted, there is still considerable volatility and unease in the market.

The restriction on Ukrainian exports has pushed up the prices of those commodities from other sources, too:

0 %
percent increase in price of cereals
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percent increase in price of vegetable oils

2. Other food prices have been adversely affected by the global fuel and energy markets

Outside of those crops and commodities directly impacted by the export disruption from Ukraine, there has been a broader knock-on effect to food and beverage ingredient prices caused by the rise in the cost of energy.

Rising energy prices have not only effected ingredients directly, but also had further negative impact on things like the cost of packaging and logistics, putting further pressure on supply chains.

If you’re worried about the rising cost of ingredients, we can help! Click the button below to book a call with one of the team and discover how Opply can save your business time and money!

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