Wheat of Ukraine | The war will not affect the food industry but prices

Soft wheat, not durum, is the real problem for the Italian producers as it is also fundamental for feeding. Besides war, speculation increases prices too.

ABC Rural: Jo Prendergast/Landline

(A version in Italian of this article has been published by IlFoglio)

The effects of a military intervention never end within the borders of the involved countries and the Russian invasion of Ukraine is no exception. Should the situation in the European granary, as Ukraine is normally dubbed, worry the Italian food industry?

To avoid any misunderstanding, it is at once necessary to distinguish between durum wheat and soft wheat. Durum wheat is the main ingredient for pasta, while soft wheat is essential in the preparation of baked and yeast products such as sweets, pizza and bread.

“For Italy, Ukraine and Russia are almost irrelevant durum wheat suppliers”, Valerio Filetti says, president of A.G.E.R., the Bologna-based agricultural stock exchange. “Unfortunately, in the last two days wrong claims have circulated according to which if Ukraine stops sending us wheat, we will no longer be able to produce pasta. That is absolutely unfounded. The percentage of durum wheat we receive from Ukraine and Russia is very little. In Eastern Europe, the real massive exporter of durum wheat is Kazakhstan, while on a global level it is Canada”.

If at all, concern should be focused on the sector of sweets and bread, which is highly dependent on soft wheat, but Vincenzo Divella, Order of Merit for Labor and CEO of Divella pasta factory, is confident: “We’ve got stockpile for one or two months and, in any case, we can replace Ukrainian wheat with that coming from different nations, such as the Usa or Australia, even though it will be more expensive. At the moment the real problem - Divella continues – comes from logistics: we don’t know when the wheat shipments will sail as Ukrainian ports such as Odessa or the Sea of Azov are no more operational. I am waiting for a ship's departure, too”. Furthermore, it can take some months for a commercial port to fully recover, as we have seen recently.

Italy imports around 20 percent of its total soft wheat from Ukraine, but only a portion of it is used for food-related purposes. The other very important use is in animal husbandry, Filetti explains. “From Ukraine, we also receive a lot of products for the preparation of animal feed, such as pea, beetroot pulp and sunflower derivatives, like flour. While other sources of supply can be found for the food industry, finding alternatives for this sector is more complex because these are very specific products, in which Ukraine is highly specialised. Even though animal feed is also stockpiled in large quantities, we hope the war will end as soon as possible”.

Some other markets could be heavily hit by the difficulties related to the lack of soft wheat. Northern African nations, for example, do not only import more soft wheat than Italy, but are also commercially more dependent on Russia and Ukraine.

The volatility that has hit financial markets since the invasion of Ukraine, has affected the agricultural ones, too. Filetti reports that on Thursday the prices of some cereals rose by up to 7/8 per cent, confirming that nobody had really expected a military attack of this magnitude, despite the numerous warnings in the previous days.

In addition to the surprise, we should also consider the speculative factor, which may generate huge gains in a situation of such high uncertainty. Despite the prices of some goods reached their peak on Thursday, they decreased rapidly later in the day to confirm that the operator of the instant telematic markets (like the one in Chicago, which is important) trusted in a rapid conclusion of the conflict.

It is not the first time that the agricultural markets have been damaged by a surge in prices in the last months. Previously, the sector had been shaken both by increasing raw materials prices and by the increased cost of energy goods, which currently make supply chain management complicated. In just a few months soft wheat moved to 320 euros per tonne from 220 euros, durum wheat rose to 550 euros from 300. “We do not expect prices to decrease for the next year either. By now, fertilizing and production costs are too high and will not drop quickly”, says Pierantonio Sgambaro, president of the homonymous pasta factory.