The Russian invasion of Ukraine has upended global markets for food and power, with necessary penalties for farmers and food shoppers around the globe.
Russia and Ukraine are main exporters of farm commodities. Russia is the world’s largest exporter of wheat, and Ukraine is the biggest exporter of sunflower oil. Over the final 5 years, Ukraine’s mixed exports of corn, wheat and barley have been second solely to these by the United States.
The warfare precipitated a spike in costs for grains, as importers nervous that merchandise wouldn’t have the ability to be shipped from Black Sea ports. The May futures contract worth of wheat elevated from lower than $8 per bushel on Feb. 16 to briefly high $13 per bushel on March 8.
In its month-to-month evaluation, USDA in March solely made modest downward revisions in its estimates of grain exports from crops harvested final yr in Ukraine and Russia. Most of final yr’s crop had already been shipped earlier than the warfare broke out.
An even bigger query is what is going to occur to grain manufacturing in Ukraine and Russia in 2022. Will farmers have the ability to acquire inputs, plant and harvest their crops? Especially in Ukraine, the outlook is at greatest unsure.
Most wheat grown in the area is winter wheat. That means it was seeded final fall, is in dormancy now, and will likely be prepared for harvest this summer time. Field work for many spring-planted crops like corn and sunflowers has but to start. Thus, it’s too early to say with confidence what is going to occur to 2022 crop manufacturing in Ukraine.
Higher grain costs clearly profit U.S. grain producers and these in different international locations. Of course, in addition they suggest larger food prices.
In excessive revenue international locations, different elements in all probability have a bigger affect on shopper food costs, as the price of uncooked farm commodities solely accounts for a small share of the worth of the processed meals we purchase. In many decrease revenue international locations, nonetheless, larger grain costs have a a lot bigger proportional affect on what shoppers pay for bread and different staple meals.
Higher feed costs improve the price of producing cattle, hogs and poultry. If this causes folks to cut back their manufacturing, it would ultimately translate into larger shopper costs for meat and dairy merchandise.
Finally, the battle can be impacting different farm manufacturing prices. Oil costs jumped to over $100 per barrel, elevating the value of diesel gas used to run farm equipment.
Fertilizer costs, already excessive earlier than the invasion, may very well be pushed larger. Russia is a significant exporter of fertilizer, so world fertilizer costs are delicate to any reductions in Russian gross sales. Furthermore, if pure fuel provides to western Europe are disrupted, the price of producing nitrogen fertilizers may also be elevated.
The United States just isn’t a significant importer of Russian oil, pure fuel or fertilizer, however we dwell in an interconnected global financial system. If Russian exports are restricted, it raises costs in international locations we do commerce with, and the consequence is a rise in U.S. costs as effectively.
What occurs subsequent is much from clear. Regardless of the impacts on global food markets, the human toll of the warfare is extreme. Our hearts exit to our Ukrainian colleagues and their households.
Pat Westhoff is director of the Food and Agricultural Policy Research Institute on the University of Missouri and a professor of agricultural and utilized economics. The opinions expressed listed here are his personal and don’t mirror official positions or endorsements of the University of Missouri.