Farmer standing in wheat field in Ukraine

Russian-Ukrainian Conflict Adds More Complexity to Global Ag Markets

The Russian-Ukrainian conflict continues to influence the already complex dynamics of global agricultural markets, with the cessation of exports out of the Black Sea making several African and Asian countries increasingly anxious about food security.

According to a report from the United Nation’s World Food Program (WFP), it is estimated that Russia and Ukraine have 13.5 million tonnes of wheat and 16 million tonnes of maize in storage, effectively inaccessible to the world given the current closure of the Black Sea ports.

Egypt, formerly the biggest importer of Russian wheat – has put a stop to exports of homegrown grain, while the cessation of sunflower oil from Ukrainian ports has caused a wave of anxiety among Turkish consumers as they scramble to buy cooking oil.

Almost 50 countries, including some of the world’s poorest nations, rely on Ukraine and Russia for food exports, causing governments to consider alternative suppliers as supplementary measures. While this presents a potential opportunity for the Australian industry, the bottleneck of export ships means that we’re unlikely to see any short term benefit from increased demand.

The global situation may become more complex depending on the seasonal conditions affecting growing regions this year. La Nina conditions are creating uncertainty with a recent report showing that North America and some European countries have experienced yield gains since global temperatures have risen, while hotter and wetter conditions in West Africa have caused sorghum and millet performance to drop.

“Climate change is increasing weather and yield variability and if severe weather events such as droughts, heatwaves, or floods will hit this season there will be compound effects, destabilising the food system further,” said Jonas Jagermeyr, a climate scientist and crop modeller from the NASA Goddard Institute for Space Sciences.

“China already indicated that their wheat outlooks are very poor and other world regions don’t look great either,” he added.

Disruptions to seeding in Ukraine and Russia this year could exacerbate the situation to a more serious level, warns Maximo Torero, chief economist for the Food and Agriculture Organization.

“My greatest fear is that the conflict continues – then we will have a situation of significant levels of food price rises, in poor countries that were already in an extremely weak financial situation owing to Covid-19.”

Mr Torero estimates that the price of wheat will rise by a further 8.5% if the war continues.

While the upward pressure on global wheat prices may provide the Australian market with optimism – especially given the bumper 2021 harvest – the situation continues to drive the price of inputs to record levels.

As well as being the world’s biggest exporter of wheat, Russia is also a leading exporter of fertiliser and potash, causing input costs to continue to rise along with diesel. With price hikes on glyphosate caused by supply chain issues in China, Australian growers are becoming increasingly anxious about the cost of production for the upcoming season.

“It’s everything from chemicals to fuel to fertiliser are just skyrocketing,” said James Coggan, a grain grower from southern Queensland.

“Fertiliser has gone up by 75 to 85 per cent and fuel’s almost gone up 50 per cent, so that’s really only in a 12-month period.”

While last season was one of the best on record for Mr Coggan, he is now concerned that his 2021 grain profits will be largely used on input costs in 2022.

“..everything from chemicals to fuel to fertiliser are just skyrocketing.”

Sources: ABC, Scientific American, The Guardian

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