Russia’s attack on Ukraine could lead to a major food crisis by disrupting current supply chains and further advancing Moscow and China’s influence in global markets.

Conflict has perpetually been a leading factor of food insecurity across the world.

As Russia's military operation in Ukraine enters its seventh day, concern has intensified over its impact on agricultural supply chains. 

Russia and Ukraine are among the top five international exporters for many important cereals and oilseeds such as wheat, sunflowers and corn.

Ukraine accounts for 16 percent of global corn exports and 12 percent of wheat exports, according to the US Department of Agriculture (USDA).

As a key corn supplier for Europe and China, Ukraine produced a historical high of 42 million tonnes in 2021, says the USDA.

Ukraine also produces 50 percent of the world’s sunflower seed oil, and alongside Russia, meets over 50 percent of the cereal needs for North Africa and the Middle East, according to the International Food Policy Research Institute (IFPRI).

But, large areas of food crop production in Ukraine directly border Russia and Belarus where Moscow’s troops had been gathering for weeks leading up to the conflict. 

Currently, Russia’s attack on Ukraine has closed Kiev’s ports and led to a ban on commercial vessels in the Azov Sea, which connects to the Black Sea – one of the world’s most important regions for trade.

So if Russia takes full control of Ukraine, it takes an even larger piece of the global food supply pie. 

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Short and long term consequences

Russian military operations could have both short and long term consequences moving crop production within and beyond Ukraine, says the IFPRI

At immediate risk are vulnerable countries highly dependent on Ukraine for food supplies that are currently being halted.

Ukraine supplies Lebanon with 50 percent of its wheat consumption, Libya with 43 percent, Yemen with 22 percent and Bangladesh with 21 percent, according to the Financial Times (FT).

In addition, Ukraine and Russia account for 86 percent of Egypt’s wheat imports in 2020 and 75 percent of Türkiye’s wheat purchases, says FT.

The World Food Programme (WFP) has expressed concern over the conflict, saying it “stands ready to deploy in support of affected populations.”

“With up to 283 million people currently acutely food insecure or at high risk in 81 countries, and 45 million already teetering on the brink of starvation, the world can’t afford another conflict,” said Margot van der Velden, WFP’s Director of Emergencies.

If the war persists and exports continue to be halted during the Ukrainian harvest season coming up in a few months, the chaos will reverberate throughout the globe.

Independent agronomist Michael Lee told TRT World he believes the long-term consequences are “too early to even consider” but the conflict poses a risk to global food prices as “Ukraine (and Russia) dominate the grain trade.”

“Even in peacetime, any talk of a good crop or drought will move the market. The implications of trade ceasing altogether with no indication when they will restart are monumental, far-reaching and will absolutely affect global food prices,” said Lee.

Not to mention the conflict’s impact on fertiliser exports due to sanctions, which will create a vicious cycle in the production of agricultural crops.

“Russia (and Belarus) produces fertiliser, sanctions will limit the supply of fertiliser, prices will go up, farmers will apply less, yields will decrease, grain prices will increase,” explains Lee. 

READ MORE: WFP: Millions face food insecurity in war-torn Syria

Concerned buyers 

Russia’s invasion comes as global food prices have already hit record highs since 2011 with wheat prices alone rising by more than a fifth since the year began, according to FT. They have hit a near 10-year high, while corn prices have risen 15 percent.

Elena Faige Neroba, business development manager at agricultural brokerage company Maxigrain told TRT World that the market has changed “quite a bit” in the last few seasons due to the effects of the Covid-19 pandemic and weather conditions.

“For the last few seasons supply is limited, and demand against the backdrop of growing populations in countries where wheat is consumed, but almost not produced, and the psychological desire to stockpile, is only growing,” said Neroba.

Neroba expressed concern over “the threat of supply disruption from one of the world's largest grain-producing regions” for Maxigrain, which operates around 1 million metric tons of cargo per year.

She said buyers are currently afraid of Russian sanctions, both current and future, citing concerns such as banks blocking payments or shipowners being unable to provide vessels for transportation.

Currently, around “7 million metric tonnes of Ukrainian wheat and more than 12 million metric tonnes of corn are still unshipped but partly sold which means some buyers should find substitution immediately,” warned Neroba. 

“If I were a buyer I would be afraid of a new portion of sanctions regarding [whether] I will get my cargo [or not],” she added.

Currently buyers of corn have rushed to European Union supplies to replace Ukrainian exports blocked by Russia, particularly leaning on imports from Romania, Bulgaria and France.

READ MORE: Stocks fall, oil prices rise as Ukraine-Russia conflict rages

Agricultural pact with China

Russia, the world’s top wheat exporter, and China, one of the world’s largest wheat importers, recently signed a broad agricultural deal. 

The deal allows Beijing to import wheat from anywhere in Russia, pushing some Western markets such as Canada out of trade with China.

In addition, about a third of China’s corn imports come from Ukraine but under Russian control this volume could spike to match Beijing’s growing demand – which has increased nearly four-fold in 2020 than the previous year. 

Thus, Russia’s control over critical amounts of trade from Ukraine’s fertile land could lead to a significant reduction of dependency on Western markets for both nations.

It also means Russia will be able to decide which countries receive critical food supplies and which don’t, explain experts Ian Ralby, David Soud and Rohini Ralby of I.R. Consilium.

“Amid the chaos of this conflict and the threat to Ukrainian lives and independence, one critical implication has been grossly underexamined: how Russia could rely on China’s support to weaponize global food supply chains,” they write in an op-ed for Politico.

“China’s agricultural arrangements with Russia, along with the hydrocarbons deal, formed the guarantee Russia needed to be able to attack Ukraine without fearing Western sanctions,” the experts said.

They argue that to avoid this power play a wedge must be driven between Russia and China by the US, while maintaining trade orders to Ukrainian partners to support the country’s economic sovereignty.

If action is not taken soon a food security crisis will be felt across the globe, beginning with the most fragile states and regions, warns WFP director David Beasley.

“It’s going to have a dramatic impact on food costs, shipping costs, oil and fuel. Just when you think it couldn’t get worse, it’s going to get worse,” said Beasley

READ MORE: Russia blocks payments to foreigners holding rouble bonds, stocks

Source: TRT World