Ukrainian farmers and food-importing nations in the Middle East and North Africa will feel the pain of the Russian interruption of grain exports through the Black Sea corridor, said the IFPRI think tank on Monday. The importer nations face their highest need for grain in the months ahead with supplies in doubt and commodity prices jolted higher.
Wheat futures prices were 6 percent higher at the end of the trading day at the Chicago Board of Trade, driven by the sudden tightening of supplies. Soybeans and corn futures also rose.
“Higher global market prices mean consumers around the world will pay more for imports,” wrote IFPRI analysts Joe Glauber and David Laborde in a blog. But farmers in Ukraine, unable to benefit from higher prices, were expected to sow less winter wheat. That would mean a continued strain on taut world supplies because Ukraine ordinarily accounts for 10 percent of global wheat exports.
“The short-run effects will include higher global prices and a continued disruption in trade patterns for those countries that have depended on Ukraine for grain and oilseed imports,” said the IFPRI senior research fellows. “The suspension will also hurt Ukraine’s producers, meaning that market disruptions will continue to have global impacts into 2023 and perhaps beyond.”
Over the weekend, Russia said its Black Sea fleet was attacked by drones and suspended its participation “for an unspecified period of time” in the July agreement, brokered by Turkey and the UN, that allowed grain exports from both nations to flow through a corridor in the Black Sea. The agreement was to expire in mid-November and Russia had indicated repeatedly it might not approve an extension.
Martin Griffiths, the UN emergency relief coordinator, said Ukrainian exports “operate as a huge lever on price, with positive ripple effects throughout the world.”
The United Nations said “emergency measures have been taken to release some of the cargo from Ukrainian ports and to inspect some of the roughly 100 vessels that are queued up and ready to sail.”
Warfare in Ukraine was among half a dozen disruptions in U.S. and world agricultural markets, beginning with the Sino-U.S. trade war in 2018, wrote agricultural economist Carl Zulauf of Ohio State University at the farmdoc daily blog. World consumption of corn, soybeans and wheat has continued to rise — a testament to the ability of the agricultural sector to increase production in non-affected areas and to adjust supply lines.
“Various areas of the world have, however, been harmed by one or more of the major disruptive events,” said Zulauf. “Cumulative effects on world consumption could become evident moving forward. In particular, world corn consumption should be monitored.” Corn needs attention because consumption this year has running 5 percent below the long-term trendline.
Some 9.3 million tonnes of Ukrainian grain, oilseeds and other food stuffs has been exported under the July agreement, double the pace before the pact but still only half of the pre-war rate, said Glauber and Laborde.
Countries in the Middle East and North Africa are particularly reliant on grain from Ukraine and “they tend to buy more during the winter to supplement their own harvests which are largely consumed by the end of the year,” said the IFPRI analysts. “The renewed interruption in imports could increase food insecurity in these countries and potentially exacerbate political tension.”