Economic analysis: examination of countries vulnerable to grain price increases


The authors are economists from Shinhan Investment Corp. They can be contacted at [email protected] – Ed.

Rising grain prices leading to fears of agflation

Rising agricultural commodity prices are fueling fears of agflation. Global agricultural production was hit hard by the unfavorable weather conditions last winter, and the Russian-Ukrainian war is having the effect of further tightening supply. Changes in the prices of agricultural products generally pass through to food and beverage prices after an average lag of eight months. The time lag is relatively shorter in emerging markets and longer in developed countries. Food prices tend to fluctuate immediately with grain price changes in countries like Brazil and Lithuania, but move after a four-quarter lag in the UK and Switzerland.

Growing caution towards countries vulnerable to rising agricultural prices

Agflation has a greater impact on countries where local food prices react sensitively to changes in international prices for agricultural products, or where food and beverages account for a larger share of total consumption. The main grain importers are Eastern European countries and some Asian countries such as China and Indonesia. Food and beverages account for a larger share of total consumption in emerging economies in Asia and Europe, as well as countries in Central and South America. Food prices in Korea, due to its low rate of grain self-sufficiency, are very sensitive to changes in international grain prices. However, food and beverages make up a relatively small share of the country’s total consumption, similar to levels seen in major developed countries.

Mainly expected impact on emerging Europe and BRIS countries

Countries or regions with agricultural trade deficits are the most vulnerable to rising agricultural commodity prices. Africa and Central and East Asia are net importers of cereals, while Eastern Europe, North America and parts of Southeast Asia are net exporters which are less affected by grain price increases. In summary, we expect to see the greatest impact of higher grain prices in emerging Europe, including Hungary and Estonia, the BRIS countries (Brazil, Russia, India and Africa) as well as in Central Asia . In contrast, the United States, Japan and Northern European countries are expected to see a relatively limited impact from grain price increases.


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