The intensification of the Russia-Ukraine conflict has heightened concerns about global food security. In an analysis, ANBOUND points out that if the conflict continues for a long period, it will have a severe impact on the global food market. This is not only related to direct food supply, but may also be linked to the entire industrial chain of food production, logistics, and circulation.
Russia and Ukraine are important grain producers in the world, with their output of wheat, corn and barley playing an important part. In 2021, the global grain production reached 2.821 billion tons, of which Russia's output was 121.4 million tons, accounting for 4.3% of worldwide production. Among them, the production of barley was 18 million tons, wheat 75.5 million tons (accounting for 9.7% of the global total), and corn 15 million tons. Meanwhile, in the same year, Ukraine's grain production was 73.8 million tons, accounting for 2.62% globally. In 2021, Ukraine produced 8 million tons of barley, 33 million tons of wheat, and 42 million tons of corn (3.5% of global production).
In terms of global market supply, because Russia and Ukraine consume less, their weight in global export share is greater. The global wheat export volume in 2021 was 206 million tons, of which Russia exported 35 million tons, accounting for 16.9% of the total, making it the world's largest wheat exporter; Ukraine's wheat export volume was 24 million tons, accounting for 11.6% of the world's total wheat exports, being the fourth largest wheat exporter internationally. The two countries' total wheat exports accounted for 28% of the world's total exports, and their corn exports accounted for 18.6%. If both Russia and Ukraine fail to supply the corresponding amount of food to the world due to the war and related sanctions, there may be a huge gap in the world food market. Many market participants believe that even if the United States, Canada, Australia and other countries increase the acreage of wheat, corn and soybeans, they still cannot make up for the supply gap.
The current most direct constraint on the grain exports of the two countries is the local traffic conditions. Most of the grains of the two countries are transported through the Black Sea. The southwestern Ukraine ports of Odessa, Kropyvnytskyi, Nikolaev and Chornomorsk cover nearly 80% of Ukraine's grain exports. However, since the war between Russia and Ukraine, many trading ships sailing through the Black Sea have been attacked by artillery fire, mines and even missiles. Shipping in the Black Sea is now almost paralyzed, and it has become hard for the food supply to be transported through the sea.
The disruption of grain exports due to sanctions and tightening trade policies has further aggravated the situation. The Ukrainian government recently announced that it will ban the export of wheat, oats, millet, buckwheat and other important food crops, in order to give priority to its own people. This ban on wheat exports poses a huge risk to countries that rely on importing grains from Ukraine. For example, 50% of Lebanon's, 43% of Libya's, and 32% of Tunisia's wheat imports are from the country. There are 14 countries whose dependence on Ukrainian wheat exceeds 10%. The latest news shows that Russia plans to ban grain exports until June 30, involving wheat, mixed wheat, rye, barley and corn. For Russia, Western sanctions have made many buyers wary to order Russian goods, and banks are reluctant to provide financing for Russian goods trade, which makes it very difficult for Russian agricultural products to enter the global market. While the Russian wheat export market is still open, however, due to the impact of sanctions from the United States and other countries, the pace of exports has slowed down significantly. In the recent stage, only Pakistan has confirmed that it will import another 2 million tons of Russian wheat.
Another hidden danger brought about by the Russia-Ukraine war is the large-scale interruption and delay of agricultural production in the relevant areas. Sowing in Ukraine usually starts in mid-April, with spring crops being mainly maize, sunflower seeds, barley and spring wheat. With the spring sowing season approaching, the continuation of the war will result in large amounts of land remaining uncultivated.
According to Ukrainian internal estimates, the spring planting area in Ukraine may be as little as 30% of the projected area, with the most optimistic estimate being 50%. If Ukrainian farmers cannot plant crops, it will affect the global supply of 50 million tons of grains. Interruptions in crop fertilization will also affect harvest expectations, which are currently in the top-dressing period for Ukrainian winter wheat, where it could be 15% lower than in previous years if fertilizer supplies fail to keep up.
The influence of the Russia-Ukraine conflict on the worldwide grain market is due not only to the fact that both countries are large producers and exporters of grain but also to the fact that both countries are key manufacturers of global fertilizers.
Among them, Russia is the world's largest exporter of chemical fertilizers, and its nitrogen, phosphorus and potassium fertilizers are among the top three exporters in the world. In 2020, Russia produced about 13.5 million tons of potash fertilizers, accounting for about 20% of the global supply. It exported about 10.84 million tons, about 19% of global trade volume. In 2020, Russia has even replaced China as the world's largest urea exporter, accounting for 14% of the global market supply. Belarus is the world's third-largest potash fertilizer producer, accounting for about 17.4% of the world's total potash production. Before the Russia-Ukraine war, the global fertilizer supply was already tense. With Russia's recent announcement that it will stop exporting chemical fertilizers coupled with the previous ban on the export of Belarusian potash fertilizers, more than 30% of the world's potash fertilizer supply will be affected. The global rise in natural gas prices has also seriously hindered the production of nitrogen fertilizers. The worldwide fertilizer production and supply situation is anticipated to worsen in the future, and the growth of nearly every important crop in the world is dependent on fertilizers such as potassium and nitrogen. Without a stable supply, the production of almost all crops in the world will face daunting challenges, and this impact will be comprehensive.
Final analysis conclusion:
Russia and Ukraine are both major global grain producers and exporters, and the war between the two has impacted both of their normal external supply and local agricultural production. Coupled with the impact of this on industrial chains, the global grain market is likely to be severely affected.
