For a long time now, grain prices around most of the globe have operated on a relatively even keel, with the physical price difference between one place and another about equal to the cost of transport between them.

That is what free trade does and it was generally regarded as the enemy of the producer and the friend of the user.

Is this about to be turned on its head?

When access and availability become very important, it is hard to beat a local supply. But, in Ireland, local production has continuously been hammered by imports of feed and feed substitutes from every corner of the world.

But what would happen if some of these sources dry up?

Following the extreme volatility being experienced in global grain markets in recent days because of the invasion of Ukraine, a number of countries appear to be reassessing their import and export policies.

A report by the Agriculture and Horticulture Development Board (AHDB) in Britain late last week indicated some of the early changes being mooted.

Protectionist reactions

Some of the suggested changes are likely to be protectionist in nature, as governments move to protect their populations against the worst consequences of increasing food price inflation.

While such actions may work for the country in which they are implemented, they may also tighten supply availability for the rest of the world and contribute to even higher prices elsewhere.

Other potential changes could see a reduction in imports or the release of stocks from some countries to increase supply and potentially dampen prices, but these seem less likely in this current scenario.

The AHDB report suggests that the following countries are considering some of these different measures.

Algeria

It is reported that Algeria is now to accept offers for French wheat to meet its import tenders. This source was previously excluded, as Algeria purchased a lot of its grain from the Black Sea region. In the short term, this could increase demand for French wheat and push European prices even higher.

Bulgaria

As an exporting country, there are rumours that Bulgaria may act to reduce its exports of grain to help reduce some internal price inflation. There has been no official statement on the matter, but the AHDB reports that customs clearances on grain exports through its ports are taking longer to process. This would ultimately reduce exports.

Argentina

Officials in Argentina are said to have created a ‘trust’ to help government tackle food price inflation, which was a problem even before the invasion. It is reported that for every tonne of wheat exported, exporters must pay a percentage of its value into the trust, capped at 1%.

This money is then to be used to subsidise domestic prices for flour and dry pasta - staple foods. The policy is to remain in force until January 2024.

Argentina had already moved to limit exports by placing taxes on wheat, maize, soya beans and soy oil that is exported.

The additional ‘levy’ adds further complexity to the exporting of wheat from Argentina. It could also move farmers there away from wheat production and thus further limit future supply and add further to global supply tightness.

EU27

The European Commission is now to consider allowing the cultivation of ‘set-aside’ land to boost grain production in 2022. With spring cereal planting already well under way across parts of Europe, it is expected that any change to the rules now would likely affect maize or protein crops, spring sown oilseeds or pulses.

USA

There is talk of the US government reducing its biofuel blending mandates. However, official statements suggest that this is not being ‘seriously considered’ for the moment.

The volume of biofuels blended into road transport fuels is set annually in the US and so this could be a once-off option.

This would allow blenders to reduce the amount of biofuel added to fuel blends and decrease the demand for maize and soya oil for these markets.

This would increase available supplies of maize and soya oil to the world market.

More to follow

The extent to which countries are likely to react and alter policy will be influenced by the likely duration of the sanctions that are being imposed on Russia.

From the way things look at present, it seems more likely that these will last for a long time and that a range of measures will be used by many countries over the coming years to try to address the consequences of this loss of 25% of global traded grains from the world market.

Indeed, the current wake-up call on food and energy security may well force a significant alteration of policy direction on a range of issues in many parts of the world.