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New Obstacles to Ukraine Wheat Exports Pose Risks for World Food Supplies

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In a move with ramifications for global food supplies, Ukraine’s neighbors Poland and Hungary temporarily suspended grain imports from the war-torn country. That comes as Russia injects new uncertainty into whether it will renew the Black Sea Grain Initiative, which allows Ukraine to ship agricultural products from Black Sea ports safely, when it expires next month. 

The developments have helped support corn and wheat futures and heightened concerns about world supplies — especially wheat supplies, which have been depleted by production declines caused by drought. 

Currently, the Gro Drought Index, aggregated for all the world’s wheat-growing regions, is at its highest level in at least two decades, as shown by Gro’s Climate Risk Navigator for Agriculture. Similarly, aggregated soil moisture levels for wheat worldwide are at their lowest point since at least 2010. 

High drought levels in wheat growing areas of the US southern Plains, North Africa, and the European Union portend another year of poor wheat production. 

Poland and Hungary said suspending Ukraine food imports are aimed at protecting local farmers from price declines. Slovakia has announced it would do the same and other countries in central and eastern Europe said they were also considering action. 

Ukraine’s wheat exports slumped by 45% in the year following the Russian invasion in February 2022, compared with the previous year. Exports picked up after the Black Sea Grain Initiative was put in place last July, and have jumped in recent months, as shown in this Gro display

In addition, large quantities of Ukrainian grain, shipped via rail, ended up staying in European countries due to logistical constraints. This flooded local markets, putting downward pressure on prices and sales for local farmers. Ukrainian grain is cheaper than that produced in the EU. Ukraine’s corn exports followed a similar pattern. 

Russia and Ukraine are two of the world’s most important producers of agricultural commodities, and major players in the wheat, corn, barley, rapeseed, rapeseed oil, sunflower seed and sunflower oil markets. Russia is also dominant in the fertilizer market. 

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