Why has the Price of Wheat Risen?
June 1, 2022
Flour Processing Plant Engineering, Non Food Installation, Fabrications, Health & Safety
As the price of wheat, amongst other things, shot up after the war in Ukraine, many were hoping for a return to relative normality as 2022 progressed. The recent UK Flour Millers briefing has quashed these hopes however leaving an amount of uncertainty. There is strong demand globally for grains, but the weather has affected main production areas. A rise in prices has also prompted some UK farmers to limit their application of nitrogen fertiliser, impacting yield and grain quality.
So an unfortunate set of events has resulted in high crop prices, more expensive fertiliser and energy costs. These are exacerbated by extreme weather conditions in key wheat-producing regions, along with sanctions on Russian trade. The Ukraine war has had a massive impact on markets relevant to flour milling. Both flour millers and animal feed manufacturers are compromised by the current situation.
Wheat prices are 60% higher than they were in September 2021, this is mirrored by an increase in the price of maize. The price of fertiliser has risen to four times what it was a year ago. As we all know energy prices have sky rocketed, and gas and electricity prices are not capped for businesses.
There are also factors that are not that obvious but which still have a major effect, such as the cost of paper pulp rising 50% since 2020. Around 25% of flour is delivered in paper packaging, plus the portion that usually comes from Russia is now subject to embargo. The cost of freight has risen by 35% since February, with several vessels now trapped in the vicinity of the Black Sea. You have probably noticed things in the shops generally seem dearer, and there is no light at the end of the tunnel just yet.