Essentials go wild as Russia-Ukraine conflict continues

Importers in Bangladesh have already increased the prices of numerous essentials as the Russia-Ukraine conflict spills over to the worldwide consumer goods market, with prices of almost every commodity having spiked in just three days and countries scrambling for alternatives.

Bangladesh has trade links with both Russia and Ukraine and is heavily reliant on a few imports from the two countries, wheat being the primary one.

According to the Food and Agriculture Organization of the United Nations, Bangladesh, the fifth largest wheat importer in the world, ranks second among the fastest growing wheat importers in the world.

The Ministry of Food data shows that 53.42 lakh tonnes of wheat was imported in the last financial year. Of this, 37.10% were from these two countries.

Ukraine also commands more than 50% of the sunflower oil market, while Ukraine and Russia are the source for 90% sunflower import of India too.

Bangladesh imported vegetable products worth over Tk3,000 crore from Russia and over Tk2,500 crore from Ukraine in the fiscal 2020-21.

But any price hike right now may not be due to a supply shock.

FH Ansarey, president of the ACI Agribusiness, said a price hike owing to the Russia-Ukraine conflict was not necessary right now.

"The market was expected to remain normal for some time," he said. "But we are seeing that in the meantime the prices of wheat, maize and oil have gone up in the local market along with the world market."

Ansarey said they had already started looking for alternative markets. "We can import from Australia, Canada, Italy and Brazil. If those countries increase prices, we will have to import at higher prices," he said.

As those markets may be relatively costlier, Bangladesh may be eying an option closer to its shores.

Mosammat Nazmanara Khanum, secretary, Ministry of Food, said, "Russia and Ukraine are our biggest suppliers of wheat. We can get wheat for a relatively cheaper price from there instead of the US, Canada and Australia.

"Since this route is closed, prices will naturally go up. But the new market for us is India, which now produces huge quantities of wheat. We have already talked to India. We also have an agreement with Bulgaria. Wheat can be obtained from there at a relatively low price."

Although the impact of the conflict is yet to be felt in the country, wheat prices have already risen by 8-10% at Karwan Bazar, one of the largest consumer goods markets in the country, with further hikes expected.

The price hike parade

Importers at Khatunganj wholesale market, the largest wholesale commodity hub in the country, have said the prices of most commodities have risen since the start of the conflict.

For instance, the booking price of wheat has gone up to $850-900 per tonne from $750-780 in the international market.

Similarly, the price of edible oil in the international market has gone up by $50-80 per tonne.

Any price rise in the international market is instantly replicated in the domestic one.

A glance at the prices in Khatunganj reveals that prices of essential commodities have risen to record levels in the past three days.

The price of wheat has increased by Tk115 since Wednesday, currently being sold at Tk1,215 per maund.

The prices of soybean and palm oil have also risen by Tk500-700 per maund (40.90 litres).

Mustard, which is imported from Ukraine, has also registered an abnormal price hike as it is now Tk1,000 costlier per maund, currently being sold at Tk3,650.

The price of Russian maize has risen by Tk200 per maund.

Capitalising on the conflict, importers have also increased the prices of other commodities.

In just three days, the price of sugar has gone up by Tk40, while the price of white peas has risen by Tk150.

At the same time, the price of lentils imported from Canada and Australia has increased by Tk115.

Azizul Haque, proprietor of Hawk Trading, said the price of various commodities started rising on Thursday morning on the news of the Russia-Ukraine conflict.

He said if the conflict continued then the commodities market may become even more volatile in the coming Ramadan.

Alamgir Parvez, proprietor of RM Store, a consumer goods importer, said the Covid-19 pandemic had already led to a sharp rise in commodity prices due to the global production crisis.

Coupled with rising fuel and freight prices, the market had remained volatile. Additionally, the price of the dollar had also increased.

With the current conflict added to the mix, the price volatility was only heightened, he said.

More disruptions in the offing

The supply chain and transactions between traders are expected to be disrupted, leading to further price hikes.

City Group Executive Director (Corporate Affairs) Biswajit Saha said, "We are looking to export wheat and other essentials from alternative markets, but the conflict will have a long-term effect on commodity prices as booking prices have gone up and transportation costs will rise."

Importers also said that most goods from European countries arrive via the Black Sea route. But the conflict has meant that the route is also at risk and further disruptions to the supply chain are expected.

Ukraine and Russia account for a fourth of the global wheat trade and a fifth of corn, and a substantial volume is shipped through the Black Sea route.

After the conflict broke out, Ukraine's ports were shut as a result.

The global media reports that at least three merchant ships have been reportedly hit in the Black Sea since the Russian strikes began in Ukraine. Insurers are either not offering to cover vessels sailing into the Black Sea, or they're demanding huge premiums to do so, reports Bloomberg.

Meanwhile, a Bangladeshi vessel with 29 sailors remains stranded in a Ukrainian port.

Former senior commerce secretary Shubhasish Bose said that NATO's economic sanctions on Russia are a major factor behind the rise in prices, adding that third parties are likely to increase prices.

He also said that if the Swift bank transactions are closed, then transactions will be further disrupted, leading to more price hikes.