Pain for world grain from the war in Ukraine

That's the conclusion of the United Nations in the wake of the current war in Ukraine. A recent briefing - given to a meeting of G7 agriculture ministers - by Qu Dongyu, director general of the UN's Food and Agriculture Organization (FAO), outlined the potential costs of the war, over and above the huge loss of infrastructure and human life.

Ag ministers from the world's seven largest economies were told by Dongyu to expect big hikes in international grain and fertiliser prices due to the conflict, with both having huge ramifications for farmers and food supply around the globe.

"The Russian Federation and Ukraine are prominant players in global trade of food and agricultural products," he explained.

"In 2021, wheat exports by the Russian Federation and Ukraine accounted for about 30% of the global market. Combined, sunflower oil exports represented 55%."

Dongyu also added that both countries featured prominently in the global markets and tade of maize, barley and rapeseed oil.

In terms of wheat, the G7 ministers were told that both Ukraine and Russia are key suppliers of wheat to many countries around the world.

"Nearly 50 countries depend on the Russian Federation and Ukraine for at least 30% of their wheat import needs," they were told. "Of these, 26 countries source over 50% on their wheat imports from these two countries."

The FAO pointed out that wheat is a staple food for over 35% of the world's populartion, and the lack of a substitute is likely to compound the pressure on wheat prices.

It adds that sourcing wheat from different origins will increase shipping and other operational costs for many importers.

According to UN figures, prior to the conflict it was expected that Ukraine would export around 6 million tonnes of wheat between March and June 2022, and the Russian Federation 8 million tonnes during this period.

"This represents about 7% of total world wheat trade in 2021/22, which is forecast by FAO at 194 million tonnes."

It is not just wheat that is impacted by Russia's invasion of Ukraine, with global maize production and trade also hit hard.

"Ukraine was expected to export approximately 14 million tonnes of maize, and the Russian Federation 2.5 million tonnes," according to the FAO.

"Ukraine's expected exports would have represented 18% of global maize trade this season."

This would have made Ukraine the world's third largest maize exporter in 2021/22.

More than 75% of global sunflower oil trade in the world is produced in Ukraine and the Russian Federation. The UN says disruption to the sunflower oil trade will lead to substitution with other vegetable oils, likely causing spill over effects on the prices of other vegetable oils such as palm, soy and rapeseed oils.

Models done by the FAO predict the war will see global wheat prices rise between 8.7% and 21.5% in the short term and between 10.3% and 19.4% in the medium term, with similar increases expected for world maize prices.

Fert Prices Expected To Ramp Up

It is not just global grain production and trade that is impact by the Ukrainian crisis.

The FAO says 25 countries around the world rely on the Russian Federation for fertilisers - with an import dependency of 30% or more for N, P, and K fertiliser.

"The Russian Federation is a key exporter of fertilisers," FAO boss Qu Dongyu explains. "In 2020, it ranked as the top exporter of nitrogen fertilisers, the second leading supplier of potassium, and the third largest exporter of phosphorous fertiliser."