Ukraine Invasion Threatens Global Wheat Supply

The Russian invasion of Ukraine is threatening to cut off some international shipments of wheat, spurring shortages and pushing the price of a vital crop higher at a time when supply chain disruptions have already sent food costs spiraling.

Russia and Ukraine together produce nearly a quarter of the world’s wheat, feeding billions of people in the form of bread, pasta and packaged foods. The countries are also key suppliers of barley, sunflower seed oil and corn, among other products. Wheat futures on the Chicago Board of Trade were up more than 5 percent as of early Thursday afternoon, while corn futures had risen more than 2 percent.

In recent days, the price of agricultural commodities has fluctuated sharply as tensions around the Black Sea threaten to disrupt global shipments of wheat, corn and vegetable oil. Disruptions and rising prices for those commodities — as well as the cost of fuel and fertilizer, important inputs for farmers — could further buffet global food markets and threaten social stability, analysts said.

Food prices have already risen globally as a result of pandemic-related shipping disruptions, rising costs for farmers and adverse weather, and wheat is no exception. Between April 2020 and December 2021, the price of wheat increased 80 percent, according to data from the International Monetary Fund. That was on par with rising costs for corn and higher than increases for soybeans or coffee.

An atmosphere of uncertainty surrounded global markets Thursday, as Russia’s invasion of Ukraine by land, air and sea unfolded. S&P Global Platts temporarily suspended publishing trades, offers and other market values for commodities loading or delivering in the Black Sea.

The conflict halted cargo ships and caused airlines to cancel flights, further reducing capacity for companies trying to ship goods around the world.

Shipping traffic to the Sea of Azov, off Ukraine’s southeastern coast, appeared to be shut down as the conflict unfolded Thursday morning, with dozens of vessels queuing at the inlet with the Black Sea, according to Lloyd’s List Intelligence, a maritime information service.

Russia, the world’s largest wheat exporter, already limited its own shipments of wheat last year with an export tax designed to hold down domestic food prices. Further restrictions could prompt concerns about social unrest in other countries, particularly in Turkey, Egypt, Kazakhstan and other parts of Europe that import the wheat.

And since agricultural commodity markets are global, any reduction in the wheat supply could push up demand and prices for wheat grown in other parts of the world, including Australia, Argentina and the American Midwest.

The outcome partly hinges on whether countries decide to announce sanctions on Russian food, or if Russia responds with further limits on its own exports or retaliatory sanctions on foreign goods.

It remains to be seen whether other countries will issue limits on agricultural trade. But White House officials have said their efforts aim to penalize Russian leaders, the military and industrial production, rather than the Russian populace. They have been preparing a further package of sanctions and export controls that would cut off Russian access to advanced technology, like semiconductors and aircraft parts.

Analysts at Rabobank said in a note on Feb. 18 that two-thirds of Russian wheat and barley for the season had already been exported, but if sanctions ended up removing the remainder of the crop from foreign markets that could drive global prices up by nearly a third.

The effects on global grain prices will partially hinge on what China decides to do, the analysts said. China imports massive amounts of corn, barley and sorghum for animal feed from world markets. It could choose to buy those commodities, as well as wheat, from Russia, instead of other countries. In such a scenario, the impact of sanctions on global grain markets would be relatively small, they said.

On Thursday, China began approving imports of Russian wheat that had long been blocked because of Beijing’s concerns over fungus and other contaminants. The countries announced China would begin importing Russian wheat and barley on Feb. 8, shortly after Russian President Vladimir V. Putin visited China ahead of the Beijing Olympics.

China has emerged as one of Russia’s strongest potential trade partners in the event of further sanctions from the West. Chinese leaders have refused to condemn the Russian invasion of Ukraine, though they have also called for respecting national sovereignty.


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