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The conflict’s intensity and duration remain uncertain. The likely disruptions to agricultural activities of these two major exporters of staple commodities could seriously escalate food insecurity globally, when international food and input prices are already high and volatile. The conflict could also constrain agricultural production and purchasing power in Ukraine, leading to increased food insecurity locally.
Core risk factors identified
Cereal crops will be ready for harvest in June. Whether farmers in Ukraine would be able to harvest them and deliver to the market is unclear. Massive population displacement has reduced the number of agricultural laborers and workers. Accessing agricultural fields would be difficult. Rearing livestock and poultry and producing fruits and vegetables would be constrained as well.
The Ukrainian ports on the Black Sea have shuttered. Even if inland transportation infrastructure remains intact, shipping grain by rail would be impossible because of a lack of an operational railway system. Vessels can still transit through the Turkish Straits, a critical trade juncture through which a large amount of wheat and maize shipments pass. Rising insurance premiums for the Black Sea region would exacerbate the already high costs of shipping, compounding the costs of food imports. And, whether storage and processing facilities would remain intact and staffed is also still unclear.
The Russian ports on the Black Sea are open for now, and no major disruption to agricultural production is expected in the short term. However, the financial sanctions against Russia have caused an important depreciation which, if continued, could undermine productivity and growth and ultimately further elevate agricultural production costs.
Russia is a major player in the global energy market, accounting for 18% of global coal exports, 11% of oil, and 10% of gas. Agriculture requires energy through fuel, gas, electricity use, as well as fertilizers, pesticides, and lubricants. Manufacturing feed ingredients and feedstuffs also require energy. The current conflict has caused energy prices to surge, with negative consequences on the agriculture sector.
Wheat is a staple food for over 35% of the world's population, and the current conflict could result in a sudden and steep reduction in wheat exports from both Russia and Ukraine. It is still unclear whether other exporters would be able to fill this gap. Wheat inventories are already running low in Canada, and exports from the United States, Argentina and other countries are likely to be limited as government will try to ensure domestic supply.
Countries reliant on wheat imports are likely to ramp up levels, adding further pressure on global supplies. Egypt, Turkey, Bangladesh, and Iran are the top global wheat importers, buying more than 60% of their wheat from Russia and Ukraine, and all of them have outstanding imports. Lebanon, Tunisia, Yemen, Libya, and Pakistan also rely heavily on the two countries for their wheat supply. Global maize trade is likely to shrink due to expectations that the export loss from Ukraine will not be filled by other exporters and because of high prices.
Export prospects for sunflower oil and other alternative oils also remain uncertain. Major sunflower oil importers, including India, the European Union, China, Iran, and Turkey, must find other suppliers or other vegetable oils, which could have a spill-over effect on palm, soy, and rapeseed oils, for example.
March 11, 2022/ FAO.
https://www.fao.org/
