The spike in food prices that followed the outbreak of war in Ukraine underscored the country’s central role in feeding the world. By disrupting Ukrainian exports of wheat, corn, barley and oilseeds, the Russian invasion stoked fears of a hunger crisis in the poorest countries and contributed to a spike in inflation in the developed world. A deal to unblock Ukraine’s Black Sea ports has raised hopes shipping could resume soon, though challenges include mine-riddled coastal waters.
1. Why is Ukraine so influential in world food markets?
The second largest country in Europe by land area, Ukraine’s flat plains with dark, rich soil are ideal for farming. Cheap food from Ukraine helped shape the course of European history, feeding the populations of rapidly growing industrial cities in the 19th century and sustaining the vast Soviet Union through decades of isolation. Before the war, Ukraine exported more cereals than the whole of the European Union and supplied about half of the seeds and sunflower oil traded in the world. More than 30 net wheat importing countries depend on Russia and Ukraine for more than 30% of their wheat import needs.
2. How did the war affect exports?
Exports collapsed when Russian forces invaded in late February and imposed a blockade on the main Ukrainian export terminals of Odessa and Mykolaiv. At mid-year, around 25 million tonnes of grain harvested in 2021 were still stuck in the country, just as a new wheat harvest was starting. Some of the wheat, corn and barley was transported overland to Romania, Poland and Baltic Sea ports by roads, railways and barges on the Danube. These roads could only handle about a fifth of Ukraine’s pre-war exports, and efforts to increase volumes were hampered by a shortage of fuel for trucks and bottlenecks in transportation. Ukraine’s ex-Soviet railways use a wider gauge than their Western counterparts, resulting in border delays of up to 30 days. Cereal exports in June totaled only 1.4 million tonnes compared to around 5 million tonnes per month in a typical year.
3. Why is this important?
Falling deliveries from the fourth-largest grain exporter have pushed up prices and left import-dependent countries in Asia, Africa and the Middle East scrambling to secure alternative supplies. By mid-July, however, the price of wheat had fallen back to its pre-invasion level. Still, the shortages had contributed to sporadic political unrest and in May the United Nations World Food Program warned that 43 countries were at risk of famine. Ukraine has been one of the largest contributors to the WFP: Eritrea and Somalia depended almost entirely on Russia and Ukraine for their wheat supplies last year, while Tanzania, Namibia and Madagascar relied on them for more than 60% of their supplies, according to the UN. The data.
4. What is the new deal?
There was a breakthrough in months-long talks to resolve the impasse on July 22, when Russian and Ukrainian officials signed agreements brokered by Turkey and the United Nations to allow the resumption of exports from the ports of Odessa, Pivdennyi and Chornomorsk. The three locations together accounted for just over half of Ukraine’s seaborne grain exports in the 2020-2021 season.
5. What are the obstacles to the recovery of exports?
The plan’s success hinges on the Kremlin sticking to the deal and there are concerns about securing ships and insurance to transport overdue grain as the war still rages. While the largest export terminals were largely intact and still under Ukrainian control, some infrastructure has been attacked and ports and coastal waters are riddled with mines. Ukraine has accused Russia of stealing grain and exporting it. Russia profited from the blockade because it deprived the Kyiv government of revenue to support the resistance, inflicted economic hardship on Moscow’s Western adversaries, and increased the value of its own wheat on the international market (Russia is a wheat exporter even larger than Ukraine) .
6. What is the impact of the war on the next harvest?
The Ukrainian government expects this year’s harvest to be around 40% lower than last year’s as agricultural land has been damaged or cut off by the conflict. Farmers who are able to gather their crops may run out of space to store them, as silos are still loaded with last year’s grain. This lack of storage capacity, combined with a collapse in incomes that has left farmers with no money to buy seed, means it could take years for exports to fully recover.
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