While Russian troops began to invade Ukraine, aiming directly at the capital Kiev, an announcement came from Beijing that destabilized Western markets to a great extent: China has decided to buy Russian wheat. A decision that risks creating quite a few problems for Europe, including Italy, but which also shows quite clearly what position the Chinese government intends to take on the war between Russia and Ukraine.
China buys Russian wheat
Beijing has given the green light to imports of grain from all Russian regions. The announcement by the general administration of Chinese customs came a few hours after the Russian invasion of Ukraine, becoming a significant obstacle for the European Union which instead announced heavy sanctions against Moscow in an attempt to push the Russian president, Vladimir Putin, to stop.
The Wheat Agreement between the two superpowers was signed on February 8 during Putin's visit to Beijing on the occasion of the Winter Olympic Games. From that moment on, however, nothing more was heard of that agreement. At least until February 24, when with a timing that leaves no room for doubts and conspiracies Chinese confirmation has arrived.
Russia and Ukraine grain powers
Russia is the world's largest grain producer and exporter. Just behind, in fourth place, is Ukraine. Together, the two nations cover 29% of world wheat trade needs, 19% of corn exports and 80% of sunflower oil.
It is therefore not difficult to understand the reasons why yesterday on the Chicago Commodity Exchange grain prices hit a 9-year high at $9,34 a bushel (today hovering around $8,86), hitting the same levels reached during the 2011 bread riots. “Rising commodity prices – he underlined the Coldiretti – has also affected the basic products for feeding animals in farms such as soybeans that hit the highest since 2012 and corn that has been at most for eight months.”
Despite the supremacy over wheat, until yesterday Russia had never managed to "conquer" the Chinese market, with Beijing which has always sipped purchases due to concerns about possible fungi and other contamination in crops. Just four months ago, China resumed importing wheat, buying 667 tons from Russia, a minimal quantity.
How do you explain Republic, “in 2021, due to Chinese restrictions, Russian agri-food as a whole exported to China decreased by 13% compared to the previous year (3 billion exports, 9,8% of the Russian total) ”.
Why Chinese openness is a problem for the EU
However, now that Beijing has decided to open its borders to grain from Moscow, the figures and percentages could change radically, rising to levels never seen before.
Why is it a problem for the EU? The reasons are essentially two: on the one hand because, due to the war and the consequent sanctions, in the coming months the EU could be forced to face a shortage of grain and cereals and a sharp rise in prices (in addition to those of gas and oil). Secondly, because the money from China will help Russia deal with the harsh sanctions imposed by the West after the invasion of Ukraine, pushing Putin to move forward on his way. Valuable help, which also came from one of the world's largest superpowers.
It is no coincidence that harsh criticisms of the Chinese government have already arrived from Australia: “You don't go pitching a lifeline to Russia at a time when it is invading another country”, said Prime Minister Scott Morrison who, on the contrary, has announced sanctions against the Muscovite oligarchs and other exponents of the Russian establishment.
Italy's difficulties with wheat
Italy imports 64% of its wheat needs for the production of bread and biscuits. Last year, according to calculations by Coldiretti, our country imported over 120 million kilos of wheat from Ukraine and 100 from Russia.
An enormous level of exposure which therefore makes us even more more vulnerable than other countries to the risks of the ongoing war. The first concrete effects of the crisis, on the other hand, have already been seen. Not due – for the moment – to the increase in wheat prices, but to those of gas, the famous La Molisana pasta factory has decided to stop production.
“You have to work hard for prevent this crisis from affecting consumers and farmers, also due to possible speculative maneuvers aimed at forcing producers to sell below the threshold of the enormous production costs incurred in this period due to high energy prices. It is clear that, given the evolving scenario, increases in the prices of final products such as bread, flour, biscuits or animal feed cannot be excluded, which however we must limit by avoiding speculation in the supply chain", said Gianluca Lelli, CEO of Consorzi Agrari d Italy (Cai).
