Many are aware that the conflict in Ukraine is having a global impact on trade in agricultural goods, however with so much information being published on a daily basis, staying up to date on the details can be difficult. In this article we provide a summary of key information and events that is important for those involved in food and agriculture to be aware of.
Immediate Impact of the Conflict in Ukraine on Food Supply
The disruption of infrastructure and supply chains, as well as sanctions on Russia and Belarus, are having impacts on the global food and farming industry, including rising food prices, disruption to trade, and rising input costs.
The war is having a particular impact on grain markets, due to the Black Sea Region’s prominence as a grain exporting region. The IGC (International Grains Council) Grains and Oilseeds Index (GOI) spiked by 13% in March, reaching the highest point in its 22-year history. Russia and Ukraine combined accounted for around 29% of global wheat exports and 19% of corn exports in 2021. Together, they provide 19% of the world’s barley supply, 14% of wheat, and 4% of maize, making up more than one-third of global cereal exports. They are also lead suppliers of rapeseed and in 2021 accounted for 52% of the world’s sunflower oil export market.
Rising Food Prices
Food prices have been rising since H2 of 2020 but have been exacerbated by the conflict. Prices reached reached a peak in February 2022 due to high demand, higher input and transportation costs, and disruptions at key ports. For example rapeseed oil and sunflower oil prices rose more than 60%. Rising food prices will damage food security in developing countries, especially those impacted by existing conflicts. Even countries which do not rely directly on Russia and Ukraine for imports will be harmed from availability issues on the global market.
Response to Rising Food Prices
An emergency meeting of the G7 agricultural ministers issued a statement committing to cooperating closely and taking concrete actions to safeguard global food security and nutrition, especially supporting food security for the people of Ukraine. The statement reaffirmed the importance of cooperation to maintain the flow of food, products, seasonal labour, and inputs essential for agricultural and food production across the world. The group also committed to working together to address transportation challenges for food exports and commodity production.
Impact on Trade Flows
Several WTO (World Trade Organization) members have joined the United States, the EU, and the G7 in stating an intent to revoke MFN (Most Favoured Nation) treatment for Russia, invoking an “essential security” exception. This could lead to a significant shift in trade with increased restrictions and tariffs on Russian agricultural exports.
China is the largest destination for Ukrainian barley exports, accounting for 70% of Ukraine’s exports. In 2020/21, Chinese barley imports from Ukraine reached 2.9 million MT, up from just 0.9 million MT the previous year. As China is a major importer of barley, any shortfall will severely impact global grain markets driving up prices for products such as beer, baked goods, and animal feeds.
Ukraine’s imports are also disrupted due to the war. The EU is a major supplier of pork to Ukraine and reduced pork demand could further exacerbate surplus stocks inside the EU, according to Rabobank. This could lead to depressed prices and increased pressure on pig producers already facing higher feed and energy costs.
More Expensive Farm Inputs
Agricultural inputs are also impacted – Russia is a key producer of fertiliser. The conflict has heightened concerns about global fertiliser supply chains, stoked by restricted shipping operations to the region, as well as sanctions. Rising costs of crop production could impact spring planting decisions and application rates, with impacts on global yields and crop quality.
This is also affecting agricultural power-house Brazil. Brazilian farmers face a looming fertilizer crisis as the country imports approximately 85% of the fertilizer it consumes. Brazilian meat company JBS has recently announced the establishment of an organic fertilier production facility using their own waste requiring an initial investment of 134 million reais ($26.74 million).
Future Trends
Increased food prices and increased production costs may in the long-term drive moves to low input farming systems or increased investment in Agtech and productivity-enhancing technology. Although the war in Ukraine is a regional conflict, the impact is already global. There are clear shifts in farm trading patterns and rising prices which are jeopardizing food security. This could lead governments to shift towards more policies promoting self-sufficiency.
Get Support & Advice
At Farrelly & Mitchell we understand the impact of global events on each region and part of the food system. We have been working closely with our clients on food security to help mitigate challenges and uncover information to help remove uncertainties and plan ahead. Our expert agribusiness consultants can unlock regional knowledge and share global insights to find workable solutions for your projects and strategic interests.
Talk to us today to learn more about our services, email [email protected] or visit our website www.farrellymitchell.com.
For more information on our food security expertise click here.
Author
Many are aware that the conflict in Ukraine is having a global impact on trade in agricultural goods, however with so much information being published on a daily basis, staying up to date on the details can be difficult. In this article we provide a summary of key information and events that is important for those involved in food and agriculture to be aware of.
Immediate Impact of the Conflict in Ukraine on Food Supply
The disruption of infrastructure and supply chains, as well as sanctions on Russia and Belarus, are having impacts on the global food and farming industry, including rising food prices, disruption to trade, and rising input costs.
The war is having a particular impact on grain markets, due to the Black Sea Region’s prominence as a grain exporting region. The IGC (International Grains Council) Grains and Oilseeds Index (GOI) spiked by 13% in March, reaching the highest point in its 22-year history. Russia and Ukraine combined accounted for around 29% of global wheat exports and 19% of corn exports in 2021. Together, they provide 19% of the world’s barley supply, 14% of wheat, and 4% of maize, making up more than one-third of global cereal exports. They are also lead suppliers of rapeseed and in 2021 accounted for 52% of the world’s sunflower oil export market.
Rising Food Prices
Food prices have been rising since H2 of 2020 but have been exacerbated by the conflict. Prices reached reached a peak in February 2022 due to high demand, higher input and transportation costs, and disruptions at key ports. For example rapeseed oil and sunflower oil prices rose more than 60%. Rising food prices will damage food security in developing countries, especially those impacted by existing conflicts. Even countries which do not rely directly on Russia and Ukraine for imports will be harmed from availability issues on the global market.
Response to Rising Food Prices
An emergency meeting of the G7 agricultural ministers issued a statement committing to cooperating closely and taking concrete actions to safeguard global food security and nutrition, especially supporting food security for the people of Ukraine. The statement reaffirmed the importance of cooperation to maintain the flow of food, products, seasonal labour, and inputs essential for agricultural and food production across the world. The group also committed to working together to address transportation challenges for food exports and commodity production.
Impact on Trade Flows
Several WTO (World Trade Organization) members have joined the United States, the EU, and the G7 in stating an intent to revoke MFN (Most Favoured Nation) treatment for Russia, invoking an “essential security” exception. This could lead to a significant shift in trade with increased restrictions and tariffs on Russian agricultural exports.
China is the largest destination for Ukrainian barley exports, accounting for 70% of Ukraine’s exports. In 2020/21, Chinese barley imports from Ukraine reached 2.9 million MT, up from just 0.9 million MT the previous year. As China is a major importer of barley, any shortfall will severely impact global grain markets driving up prices for products such as beer, baked goods, and animal feeds.
Ukraine’s imports are also disrupted due to the war. The EU is a major supplier of pork to Ukraine and reduced pork demand could further exacerbate surplus stocks inside the EU, according to Rabobank. This could lead to depressed prices and increased pressure on pig producers already facing higher feed and energy costs.
More Expensive Farm Inputs
Agricultural inputs are also impacted – Russia is a key producer of fertiliser. The conflict has heightened concerns about global fertiliser supply chains, stoked by restricted shipping operations to the region, as well as sanctions. Rising costs of crop production could impact spring planting decisions and application rates, with impacts on global yields and crop quality.
This is also affecting agricultural power-house Brazil. Brazilian farmers face a looming fertilizer crisis as the country imports approximately 85% of the fertilizer it consumes. Brazilian meat company JBS has recently announced the establishment of an organic fertilier production facility using their own waste requiring an initial investment of 134 million reais ($26.74 million).
Future Trends
Increased food prices and increased production costs may in the long-term drive moves to low input farming systems or increased investment in Agtech and productivity-enhancing technology. Although the war in Ukraine is a regional conflict, the impact is already global. There are clear shifts in farm trading patterns and rising prices which are jeopardizing food security. This could lead governments to shift towards more policies promoting self-sufficiency.
Get Support & Advice
At Farrelly & Mitchell we understand the impact of global events on each region and part of the food system. We have been working closely with our clients on food security to help mitigate challenges and uncover information to help remove uncertainties and plan ahead. Our expert agribusiness consultants can unlock regional knowledge and share global insights to find workable solutions for your projects and strategic interests.
Talk to us today to learn more about our services, email [email protected] or visit our website www.farrellymitchell.com.
For more information on our food security expertise click here.
Author
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Sustainability & ESG
Soil sequestration’s role in the battle against climate change
The US government and large food corporations are backing soil sequestration as a tool in the battle against climate change.
Sustainability & ESG
The governments role in fostering ESG policy in agriculture
The potential for ESG policy in shaping the future of agriculture is fully within the grasp of governments.
Food safety & security
The role of smarter food supply chains in curbing food waste
SMART supply chains offer significant potential to reduce waste within the food chain and help limit the impact of the food industry on the environment.
Sustainability & ESG
2021 ESG trends: The cost of failing to integrate sustainability into agribusinesses
Trends show continued momentum behind ethically run food. Failing to integrate sustainability into an investment has consequences.
Food & beverage
Why ESG will continue to influence food industry trends
ESG remains one of the world's strongest food industry trends as sustainability and environmental concerns increasingly inform purchasing decisions.
Agtech & foodtech
Tapping into the potential of agriculture and decentralised energy
The intersect between decentralised energy and agriculture fits with the world’s ambitions on climate and food security
Agribusiness
Access to finance – transforming the story of African agribusiness
Agriculture finance is a contentious issue in Africa, as it continues to face challenges in unlocking the capital required to meet its potential.
Sustainability & ESG
A dilemma for ESG investors: Balancing local food autonomy and global supply chain advantages
Food production has a wide range of impacts which are difficult to measure, making it unclear whether individual investment in food meet ESG criteria.
Food & beverage
Immediate challenges kick in as ‘Brexit effect’ hits food supply chains
Brexit’s impact on food supply chains is already apparent, and the system will have to adapt a re-engineered resiliency.
Food safety & security
Pandemic increases Middle East food security focus
Agrifood investment steps up in response to COVID disruption. Middle East nations step up activities to shore up food security.
Food & beverage
Saudi Arabia water supply gains as food challenges mount
Saudi Arabia is proactive in protecting its water supply in terms of its relationship with agriculture, with land acquisiton and agtech key.
Agtech & foodtech
Shifting minds to shape the future food system from farm to fork
Scope for improvement in agriculture and food outcomes within the grasp of the Middle East and African nations who work together and pool their collective strengths.
Agribusiness
Can African agribusiness access the credit needed to transform?
African agriculture funding has always proven difficult. Significantly the technology now exists to support access to investment.
Food safety & security
Sustainability a key industry ingredient for food security
The role sustainability plays in a healthy and balanced food supply chain for food industry stakeholders is increasingly recognised.
Food safety & security
How to reduce food waste and loss: a different approach
One-third of the world’s food gets wasted while millions go hungry. We take a global look at the paradox that is food waste and loss and its impacts.
Food safety & security
Clamping down on global food waste to protect food security
Global food waste is under more scrutiny as the pandemic exposes supply line flaws. China, the US and UK are all impacted differently.
Food safety & security
Farrelly & Mitchell analysis: Lebanon explosion exposes lack of food security plan
Lebanon’s social and political problems had put the country in a precarious position, but the Beirut explosion has exposed a long-term neglect of food security.
Is Covid-19 accelerating ESG investment in food and agribusiness?
Is Covid-19 accelerating ESG investment in food and agribusiness?
Will Covid-19 accelerate the adoption of ESG practices as investors become more aware of the impact ESG investment is having?
Mergers & acquisitions
Pause on agribusiness investment as COVID-19 eats away at certainties
Coronavirus is proving the ultimate disruptor for food and agribusiness industries. How does it impact investment?
Food safety & security
Covid-19 presents chance to build a more resilient food system
The global pandemic is testing the merits of the global food supply chain. Can coronavirus make for a more resilient system?
Agribusiness
Newly unveiled EU Farm to Fork Strategy set to transform agriculture in Europe
The EU’s Farm to Fork Strategy is set to transform food and agriculture in Europe, with Farrelly & Mitchell well positioned to navigate clients in this new era.
Food & beverage
Poultry Import Drivers in the GCC
The GCC imports almost $2.8 billion of poultry meat annually to satisfy local demand. However, traditional exporters are under increasing pressure from different forces.
Sustainability & ESG
The Importance of ESG Due Diligence in Agri-Investing
Environmental, social and governance (ESG) due diligence is vital for businesses in terms of attracting investment, maintaining reputation and performance improvement.
Agribusiness
East Africa’s role in GCC food & Agribusiness future prospects
An overview of East Africa Food & Agricultural trade and how East Africa can supply affluent and high growth to GCC consumer goods market
Agtech & foodtech
Farming the “data”
A move towards a totally mechanised poultry industry is becoming attractive to break the chain of inefficiency & increase return from expensive feed.
Food & beverage
Meat and dairy exports to the Middle East
This presentation provides a checklist to companies who want to expand in the Middle East, by way of our own experience.
Agribusiness
Innovation intermediaries help collaborative food SMEs to create a bigger pie
Open innovation is a new-product and process development model, whereby firms use external ideas, as well as internal ideas, to advance their offering. Open innovation is a new-product and process development model, whereby firms use external ideas, as well as internal ideas, to advance their offering.
Mergers & acquisitions
Key Success Factors for Investment in International Agricultural Land
In terms of items to consider when investing in farmland, risk identification is vital to agriculture investment strategy.
Food & beverage
Sugar Rush or Sugar Push
While some segments of the sugar free-from category have been experiencing exponential growth, recent data shows that industry sales have gone down 1% in the past year
Mergers & acquisitions
Key Trends in Global Agri-Food Investment
The appetite for agri-food investment has exploded in the last two decades and is seeing no sign of slowing down. What is driving the surge?
Agribusiness
Soft Due Diligence Should Deliver Hard Results for Food & Agribusiness Deals
Due diligence, properly applied, equals an informed client. It is essential when evaluating an agribusiness acquisition.
Agribusiness
Refocusing international farmland investment
The case for adopting a holistic agribusiness perspective to investments in farmland is growing in strength.
Mergers & acquisitions
Private equity finds fertile ground in Africa
The difficulty of raising capital for the agri-food sector in sub-Saharan Africa has created an opportunity for private equity investors.
Sustainability & ESG
Emerging Markets Drive Feed Industry Growth
Strong population growth and rising incomes suggest a positive growth outlook for the animal feed industry in both emerging and developing regions.
Risk and Reward in the Saudi Poultry Sector
Risk and Reward in the Saudi Poultry Sector
The Middle East poultry market is seen as attractive for investors but competition and disease risks need to be minimised.