Key data on how the war in Ukraine is disrupting agricultural trade

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.

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.

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.

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.

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.

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).

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.