Russia/Ukraine Standoff Drives Wheat and Corn Prices Higher

Russian saber rattling on the border of Ukraine has driven global grain prices higher amid fears that a military invasion could curb exports from Ukraine, one of the world’s biggest suppliers of wheat and corn. 

The border standoff comes as global wheat stocks are at their tightest levels in years following weak crops in North America. Wheat exports by Russia, the world’s biggest wheat exporter, are down 30% so far this year after Moscow enacted export restrictions to tame domestic inflation. Meanwhile, drought in South America, a major supplier of grains and oilseeds, threatens to reduce that region’s production. 

Wheat futures prices have been hovering around record levels, fueling food price inflation worldwide. Corn futures also moved higher. 

Ukraine is the world’s fourth-largest wheat exporter, shipping mainly to North Africa — which is currently experiencing near-record drought — and the No. 3 corn exporter, mainly to China. Any cutoff in wheat shipments would likely direct additional sales to top EU exporters, especially France and Germany. Other major exporters of wheat and corn, including the US, would also face increased demand. Ukraine also is the biggest producer of sunflower seeds and sunflower oil. 

Ukraine has already shipped 16 million tonnes of wheat for the current marketing year, up 27% from a year earlier, helped by a bumper crop. The shipments represent nearly two-thirds of the wheat export limit Ukraine set for 2021/22. Most of Ukraine’s grain exports ship from the Black Sea port cities of Mykolaiv and Odessa. These lie to the west of the Crimean Peninsula, which Russia annexed after a previous invasion of Ukraine in 2014. 

Ukraine’s current winter wheat crop appears so far to be doing even better than last year, according to Gro’s Black Sea Yield Forecast Model, but its prospects will become clearer when the crop emerges from dormancy. Last fall, Ukraine announced farmers were expecting to plant 13% more wheat acreage for 2022/23 than the previous year. 

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