Today's business and finance round up 8th March 2022
📈How the war in Ukraine is feeding food inflation
8th March 2022
Bite-sized business news from the UK and beyond
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- Get that bread – How the war in Ukraine is feeding food inflation
- Staying put – Big names still in Russia facing boycott calls
How the war in Ukraine is feeding food inflation
What’s going on?
It’s not just oil prices that are spiking due to the war in Ukraine: the price of key agricultural commodities like wheat and corn are also surging.
Why is this important?
Ukraine and Russia are two of the world’s largest farming nations. The combination of war and Western sanctions - which spared food exports but have impacted shipping and other aspects of the supply chain - has severely eroded the supply of those goods in global markets, sending prices through the roof.
- Wheat prices have risen over 50% in the past month as exports from Ukraine and Russia (which together supply 30% of the global wheat market) have dried up.
- Corn prices have risen around 30% in the past month, as exports from Ukraine—which supplies 16% of the world’s crop—have halted.
Although the UK does not import much, if any, agricultural goods from Ukraine and Russia, many countries in the Middle East and Africa are major consumers.
And there are now concerns that the war could make food unaffordable for many of the poorest regions across the world leading to severe malnutrition and starvation.
Although the UK isn’t reliant on Russian or Ukrainian wheat, the rising price of these commodities in the global markets will contribute to higher costs for consumers.
Before the conflict tight supply chains, worker shortages and rising energy prices had already stoked UK inflation to a 30-year-high. Now the far reaching implications of Russia’s invasion means that inevitably inflation will continue to rise.
Big names still in Russia facing boycott calls
From American Express to Zara, Nike to Google, a wave of Western companies have suspended operations in Russia in response to the war in Ukraine. But iconic brands including McDonald’s, KFC and Coca Cola are now facing growing pressure to follow suit from investors and consumers.
The New York state pension fund, which controls nearly $300bn of investments, wrote letters to large international companies, advising them to rethink doing business in Russia because they face "significant and growing legal, compliance, operational, human rights and personnel, and reputational risks".
Hashtags like #BoycottCocaCola and #BoycottPepsi have also started trending on social media. Three Ukrainian supermarkets chains have now pulled the popular fizzy drinks from their shelves.
After the Soviet Union collapsed in the early 1990s, fast food chains were among the first to build a presence in Russia. When the first McDonald's opened in Moscow an estimated 30,000 Russians queued up to try its products. 30 years on McDonald’s has 847 restaurants and KFC has over 1,000 in the country.
These companies have remained silent on their future in Russia although have donated to humanitarian effort in Ukraine. But choosing to stay when others have left could put their reputations on the line and threaten sales elsewhere in the world if consumers boycott.
With military action being off the table for the West, the hope is that economic sanctions and isolating Russia from the international community will pressurise President Putin into retrenching.
Stat of the day
The global death toll from Covid-19 has surpassed 6m
Other stories to keep you in the loop
- UK house prices rise at fastest rate in 15 years, says Halifax
- UK faces biggest income squeeze in nearly 50 years
- Boris Johnson hints North Sea oil production could be ramped up to cut off Russia
- Coinbase says it’s blocking 25,000 Russia-linked crypto addresses
- Taxpayers face £3bn Bulb bill as Russian invasion sends gas prices soaring
- Deloitte, EY, KPMG and PwC all exit Russia
- Aston Martin to develop electric car batteries with UK start-up Britishvolt
- YouTube reportedly offers podcasters up to $300,000 to create videos
- Wizz Air cuts growth targets after axing flights to Russia and Ukraine
- London Mayor plans to expand Ultra Low Emission Zone to entire city
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