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Global grain prices set to increase by 10 to 15%: IMF chief

Grain prices—which include wheat and rice—could increase between 10 to 15%, International Monetary Fund (IMF) chief economist explained in a recent IMF press conference.

Responding to reporters’ questions at the IMF’s World Economic Outlook (WEO) July press briefing, chief economist Pierre-Olivier Gourinchas said, “Now that this grain deal has been suspended…it's likely to put upward pressure on food prices.”

“We have some estimates that we're looking at, you know, in terms of how much of the supply is going to be withdrawn and what is the elasticity of prices to the reduction in demand? And we're still assessing where we are going to land. But we would be thinking that somewhere in the range of 10%, 15% increase in prices of grains is a reasonable estimate, although we'll have to see exactly how this is going to unfold.

Gourinchas’ reference to suspending the “grain deal” pertains to Russia’s decision to exit the Black Sea Grain Initiative, which, since last year, had allowed Ukraine to export grains safely, despite the ongoing Russia-Ukraine war.

After pulling out of the agreement, Russia attacked one of Ukraine’s main inland export ports for wheat this Wednesday. The attack had a fairly immediate response in the commodities market, pushing up prices as traders became concerned regarding a possible negative supply shock.

Also impacting the global grain price outlook is the Indian government’s decision to ban non-basmati rice exports. The decision has stoked panic buying, as India is the world’s top rice exporter, account for close to 40% of global supply.

The Local Scene

On the local scene, Belize is a rice producer; therefore, it is yet to be seen if the global price shocks would impact local prices. However, the case is more straightforward for imported commodities such as wheat: the high prices will be imported.

On July 21, Controller of Supplies Lennox Nicolson told The Reporter, “Any increases on the international market translate to increased price Belize faces when it imports wheat.”

Nicolson continued, “This could potentially result in increased flour prices in Belize and increased costs for the production of bakery products. However, the extent and timing of any increases will depend on factors outside Belize, but we need to monitor the impact it may have on production costs of flour and bakery products.”

Nicolson reminded us that flour is a price-controlled item under the Supplies Controlled Act. This, he says, means that the price of flour will not change overnight since any changes will have to be made via a statutory instrument.

CEO Servulo Baiza of the Ministry of Agriculture, at the time, told The Reporter that while an increase in the price of flour is expected, the mill would have to make a case for an increase, if justified, then that proposed increase would need to be presented to Cabinet for approval.

Last year, Cabinet had also implemented a program to assist bakeries to cope with the increased costs. Last year, the United Nations and Turkey brokered the Black Sea Grain deal between Russia and Ukraine to safely export Ukrainian grains across the Black Sea to developing nations. This was to drive world food prices down, which at the time had spiked due to the ongoing war.

With this latest development, Ukraine will now have to reroute exports through its land borders and small ports leading to an increased cost and a reduction in farmers’ profit. According to experts, this could lead farmers to plant even less next season, placing further pressure on supplies going forward.

Russia’s withdrawal stems from their claim that Western sanctions were stymieing parallel agreements to allow payments, insurance, and shipping for Moscow’s own agricultural products. Russian spokesperson indicated they would only resume participation once the relevant agreements were fulfilled.

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