Ukraine is losing its place as one of the world’s largest exporters of wheat and corn because of warfare, and its role could shrink further with the closure of Black Sea shipping lanes this week, said analysts at the IFPRI think tank. Russia, which has attacked Ukrainian grain ports for three days in a row, declared on Thursday that ship travel was unsafe in parts of the Black Sea.
Agricultural production in Ukraine is well below pre-war levels as farmers cope with low commodity prices, high costs, and military damage to farmland. The so-called Black Sea Grain Initiative (BSGI) facilitated the export of more than 32 million tonnes of Ukrainian farm goods over the past year, but the agreement was terminated by Russia at the start of this week.
“Unless a low-cost alternative is found to ship Ukraine grain, the end of the BSGI will lead to lower prices for the country’s producers, likely resulting in lower production for 2024 wheat and maize crops,” wrote three IFPRI analysts in a blog that looked at the immediate and longer-term effects of the shutdown.
“The impact is akin to Ukraine experiencing back-to-back droughts and would greatly diminish its role as a major wheat and maize supplier. The reduced production also poses risks for global markets; with global grain stocks at low levels and little rebuilding this current year, prices will remain volatile and responsive to potential production shortfalls.”
Russia is the world’s largest wheat exporter, and before the invasion, Ukraine was consistently among the five largest. It could drop to seventh largest in the current marketing year, said USDA data. Ukraine was also among the world’s largest corn exporters and the global leader in sunflower oil exports.
In the crop year before the invasion, Ukrainian farmers reaped 25.4 million tonnes of wheat; this year’s crop was forecast at 17.5 million tonnes by the USDA. The corn harvest, 30.3 million tonnes before the invasion, was pegged at 25 million tonnes this year.
“With Black Sea routes closed again, Ukraine will have to find alternative, and likely far more costly, ways to export its grain,” said the IFPRI blog. Grain could be shipped by land into eastern Europe or by barge from Ukrainian ports on the Danube River.
Either method is more expensive than sea transport and, in a ripple effect, would mean lower prices at the farm gate. “This Black Sea deal was a lifeline for the Ukrainian farmers,” said Arif Husain, chief economist for the World Food Program, reported the New York Times.