Russian offensive against Ukraine pushes grain prices up

25 February 20222 min reading

The Russian offensive into Ukraine has increased the supply risk for grain markets. Ukraine stopped activities in its ports after Russia launched a military operation. Russia has also suspended the movement of commercial ships in the Sea of Azov until further notice. Prices for grains rose amid concern that the conflict could hit exports from the Black Sea to world markets.

Russian offensive against Ukraine has increased the agricultural commodity prices sharply in global markets. Wheat futures rose 5.7% in Chicago to $9.35 a bushel. Corn prices rose 5.1% to $7.16 a bushel. World food prices are already at the peak of the last 10 years due to the pandemic and climate change.

The current tension has increased supply concerns in agricultural commodities, especially wheat and corn, as Russia and Ukraine are among the most important players in world grain exports.

Reuters reported that Ukraine's military has suspended commercial shipping at its ports after Russian forces invaded the country, stoking fear of supply disruption from leading grain and oilseeds exporters. Russia also ordered the Azov Sea closed to the movement of commercial vessels until further notice.

According to the US Department of Agriculture, Russia and Ukraine together account for around 29% of global wheat exports, 19% of world corn supplies, and 80% of world sunflower oil exports. Almost 10 percent of world grain production is produced in Russia, while Ukrainian production accounts for 3 percent of world production. Russia, the world wheat export leader, sold 38.5 million tons of wheat last season. Russia is expected to supply more than 34 million wheat to global markets in the 2021-2022 season. Ukraine, which has climbed up the list of grain exporters in the last decade, aims to be the 3rd exporter in wheat and 4th in corn in the 2021-2022 season.

Escalating tensions between global crop heavyweights Russia and Ukraine are likely to force wheat, corn, and sunflower oil buyers to seek alternative shipments. Ukraine exports 95% of its grain through the Black Sea and more than 50% of its wheat exports went to the Middle East and North Africa region in 2020. A disruption would have dire consequences for food security in already fragile countries. It's estimated that Lebanon and Libya import about 40% of their wheat from Russia and Ukraine, Yemen around 20%, and Egypt around 80%.

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