Ukrainian crisis: rise in cereal prices until the end of 2023


Ukrainian crisis: rise in cereal prices until the end of 2023

June 22, 2022

The Russian invasion of Ukraine has trapped 25 million tons of grain that cannot be shipped until Black Sea ports are accessible again. This will keep grain prices high until at least the Northern Hemisphere fall harvest in 2023.

Editor’s note: Excerpts from the Farm Journal webinar Farming Country Update: Ukraine’s Effects on Global Agriculture

Ukraine is one of the world’s leading grain producers, particularly wheat, barley and corn. During the Russian military invasion of Ukraine in February this year, Ukrainian Black Sea ports were closed or damaged, trapping 25 million tonnes of grain from the 2021 harvest that cannot be shipped. This had an immediate effect on world grain prices and stock levels.

Ukraine’s grain system is focused on transportation to and through Black Sea ports, according to Ukrainian agricultural expert Yevhenii Tkachenko. Grain silos and storage facilities at ports are fine, he said, but until those ports are reopened, those 25 million tons of grain cannot easily be moved.

High grain prices

The bottom line about this crisis is that “we’re not going to run out of wheat, it’s just going to be more expensive”, at least until the 2023 northern hemisphere autumn harvest, says Dr Jim Glauber , former USDA official and currently at the International Food Policy Institute.

In Tkachenko’s discussions with Ukrainian grain growers, these farmers said they would not harvest their 2022 crops. Since Ukraine’s grain production and transportation system is designed for shipping to and through Black Sea ports, farmers don’t want to incur the expense of harvesting something that won’t be shipped.

Overland grain transportation will not work, Tkachenko said. Neighboring countries are encouraging land transport to get the grain to other European ports where it can be shipped. But Tkachenko noted that the trucks can carry 40 tonnes of grain and there are 25 million tonnes waiting to be shipped, so it’s not a feasible idea.

Until these Black Sea ports are opened, Ukrainian grain will go nowhere and grain costs for the world will remain high, said Jim Wiesemeyer of Pro Farmer. Wiesemeyer thinks the Black Sea ports situation will have to be confronted at some point, although the United States is not involved in this process at the moment.

There will still be enough grain, especially wheat, to meet global demand, Glauber noted, although costs are high and will remain so for more than a year. However, if Russia’s war against Ukraine continues beyond 2023, the world grain situation will change for the worse, he said.

Low grain stocks

Glauber pointed out that, excluding China (which still appears to be an unknown in terms of grain production), current global grain stocks are at their lowest point since 2007/2008.

Glauber said that although high grain prices have already affected some countries, the biggest region affected is the Middle East and North Africa, as they are huge consumers of wheat. Wheat accounts for 35% of the calories consumed in this region, and 70% of this wheat comes from the Black Sea region — Ukraine and Russia.

As far as the production of animal feed is concerned, livestock and poultry farmers have not yet been really affected, but the increase in grain prices will catch up with them and squeeze profit margins in this sector, concluded Glauber.

Chris Wright

Christi C. Elwood