Impact of the Russia/Ukraine Conflict on Global Agriculture by the Numbers

Agricultural commodity and energy prices traded higher on Thursday, though off their peaks, following news that Russia launched an attack against Ukraine. Given the two countries’ importance to export markets, and the relationship between energy and ag prices, the conflict will impact agriculture and food supplies across the globe. 

Latest Prices 

• The March contract for Chicago wheat, the global benchmark, rose 5.7% to close limit up. March Kansas City wheat closed 5.4% higher. In Europe, Matif wheat gained 10%.  
• March corn was up 1.65%; March soybeans fell 0.81%.
• Vegetable oil prices rose across the board, with May soybean oil up 1.81%.
• Energy costs rose: April crude oil closed 0.89% up — per-barrel prices topped $100, a 9% gain, before settling back. April natural gas ended 0.91% higher. 
• Russia’s ruble dropped 4% against the US dollar amid threats of Western sanctions on Russia. 

What to Watch 

• The threat to shipments from the Black Sea region has traders adding back premium to prices. Already, Russia has halted shipments from the Azov Sea and reportedly blockaded Black Sea ports.
• Black Sea export prices, which can be monitored here, will reflect any supply shortage in the region or weakening demand from importers. 
• First EU and secondarily US wheat exports may be called upon to replace delayed Black Sea shipments. 
• Major destinations for Ukraine corn, including China and the EU, will likely need to source more from the US, due to a weak outlook for South American production.

Global Importance of Black Sea Region 

• Russia and Ukraine combined produce 14% of global wheat and supply 29% of all wheat exports. 
• The two countries account for 14% of worldwide barley production and one-third of global exports. 
• They also contribute 17% of world corn exports. 
• Russia and Ukraine combined export 76% of global sunflower supplies. Black Sea sunflower oil futures are up 11% so far this year, amid a worldwide shortage of vegetable oils.  
• Russia is one of the biggest exporters of the three major groups of fertilizers (nitrogen, phosphorus, and potassium). Physical supply cuts could further inflate fertilizer prices. 
• Since last year, urea cash prices are up nearly 90% in the US Midwest, and DAP cash prices are up nearly 30%. 
• Russia is a key global player in natural gas, a major input to fertilizer production. Higher gas prices, and supply cuts, will further drive fertilizer prices higher. 

Major Importers From Black Sea 

• Middle East and North Africa are heavily reliant on imports from the Black Sea. 
• The Gro Drought Index weighted for wheat acres in North Africa is currently at its highest level since at least 2003, degrading production forecasts. 
• Wheat imports to the Middle East are forecast to soar by 38% year over year to 24.6 million tonnes in 2022
• Drought-hit Iran, the Middle East’s top wheat producer, is expected to see production drop 20% this year to 12 million tonnes, which is 17% below the 5-year average.
• Russia’s export ban on ammonium nitrate fertilizer, through March 31, will impact Brazil, the biggest buyer, just as the South American country is beginning to plant its big safrinha corn crop. 
• Although the US doesn’t directly import Russian fertilizer, higher fertilizer prices will impact production costs as US farmers soon begin planting their spring crops. Fertilizer costs represent between 33% and 44% of total operating costs for US corn farmers.

Russia and Ukraine Production Outlook 

• If harvests aren’t severely disrupted, Black Sea production will be critical in determining global supply availability of major commodities, especially wheat.
• Production prospects for Russia and Ukraine winter wheat crops are currently favorable, as shown by Gro's Black Sea Wheat Yield Forecast Model. A strong harvest would be good news for global wheat supplies, which are at their lowest level since 2013. 
• Before the conflict, Ukraine wheat exports were forecast at a record 24 million tonnes on a bumper crop and competitive prices. From July to December, Ukraine exports of wheat were up 27% from a year earlier. Corn exports rose 10% in the October-December period. 
• The decline in the Russian ruble makes Russian exports more competitive and could incentivize an increase in exports. 
• Gro’s team of research analysts will assess the Russia-Ukraine conflict’s impact on global wheat supplies in our March 24 webinar, Preparing for 2022 Global Wheat Supply and Demand.