Russia-Ukraine conflict to hit global food supply chains

Russia’s invasion of Ukraine is expected to affect exports from one of the largest grain exporters in the world after ports closed and traders stopped operations.

Ukraine accounts for 13% of global corn exports and 12% of wheat. Its most productive wheat-growing regions stretch across the southern half of the country, which is subject to incursions by Russian forces.

While the fighting is not expected to affect planting as wheat is planted in September and harvested in July, pesticide and fertilizer is applied starting March. If that is affected, yields could fall by up to a third, Mike Lee, owner of Green Square Agro Consulting, was quoted as saying in the Wall Street Journal.

The ban on commercial vessels in the inland sea that connects to the Black Sea and closure of Ukrainian ports is expected to hit food supply, as 90% of Ukrainian grain exports go by sea, analysts say. The chart below shows the countries (in shades of red) that buy wheat from Ukraine.

Ukraine is known as the “breadbasket of Europe” and has some of the most fertile farmland in the world. Many countries in the Middle East and north Africa depend on Ukraine for wheat. Ukraine exported US$2.9 billion worth of agricultural products to the African continent in 2020. About 48% of this was wheat, 31% maize, and the rest included sunflower oil, barley, and soybeans. Europe bought $6.12 billion worth of agricultural products from Ukraine in 2020.

“The scale of the potential upswing in the global grains and oilseed prices will depend on the magnitude of disruption and the length of time that trade will be affected,” Wandile Sihlobo, chief economist of the Agricultural Business Chamber of South Africa, wrote in an essay published in The Conversation.

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A rise in prices will be beneficial for farmers, which would help given higher fertilizer costs. But the same price increases would add to food inflation and be detrimental for consumers, who have experienced significant food price increases over the past two years, according to Sihlobo.