Homepage  Homepage     Search on site  Search on site     To write the letter  To write the letter     Site map  Site map
Agro Perspectiva
We are on: 
   
 


Home > News > News

The Ukraine Conflict and Other Factors Contributing to High Commodity Prices and Food Insecurity

21.04.2022 10:15 "Agro Perspectiva" (Kyiv) According to the International agricultural trade report of the USDA «The Ukraine Conflict and Other Factors Contributing to High Commodity Prices and

Food Insecurity» (April 2022), a number of factors have converged over the last 18months to send global agricultural commodity prices to near-record levels. Russias invasion of Ukraine- and the potential loss of Ukrainian exports- was the latest development to push commodity prices higher. Other factors affecting global markets,

which date back to late 2020, include: increased global demand, led by China; drought-reduced supplies; tightening wheat, corn, and soybean stocks in major exporting countries; high energy prices pushing up the costs of fertilizer, transportation, and agricultural production; and countries imposing export bans and restrictions, further tightening supplies.

As observed during the food price crises of 2008and 2012, developing countries that are dependent on food imports are the most vulnerable to food insecurity. Such countries tend to respond to price signals by shifting consumption and trade patterns, while larger exporting nations respond by increasing production to meet demand. However, the geopolitical turmoil of a war between two major agricultural exporting countries, including the worlds largest fertilizer exporter (Russia), adds additional uncertainty and concern to todays situation.

AGRO PERSPECTIVA offers Agro + «Ukrainian Grain & Oilseed Market» weekly analytical bulletin.

Concerning subscription please contact: client@agroperspectiva.com or +380675964652 (WhatsApp, Viber, Telegram).

Reasons For Near Record Commodity Prices

Russias invasion of Ukraine comes at a time when global food and energy prices are already elevated. Over the last 18months, wheat prices have risen nearly 110percent, corn and vegetable oil prices are up 140percent, and soybean prices are up 90percent. Overall, agricultural commodity prices have been trending up since the second half of 2020, fueled by strong global import demand (especially from China), smaller world supplies due to Northern Hemisphere droughts in the summer of 2021, and tightening stocks in major exporting countries. These developments occurred as world economic growth rebounded from pandemic-curbing measures. Crude oil and natural gas prices began to surge, reflecting the economic recovery. High energy prices increased the costs of fertilizers, other inputs, and transportation. Russias attack on Ukraine has disrupted Black Sea agricultural exports, pushing prices higher, and exacerbating high energy and fertilizer costs. Trade policies in response to the market volatilities caused by the war, especially export restrictions, are further boosting food prices.

Macroeconomic Drivers

After pandemic-curbing measures around the world cut economic growth in 2020, global GDP rebounded sharply in 2021, spurring consumption and trade. According to the United Nations Conference on Trade and Development, global trade value reached a record $28.5trillion in 2021, up 25percent from 2020and up 13percent from 2019. China was the the first country to go into lockdown to stem the spread of Covid-19, and the first country to emerge and resume economic growth- as early as the second quarter of 2020- which coincided with the recovery in the countrys swine sector from African Swine Fever. Chinas agricultural imports soared during 2020and 2021, up 54percent compared to 2019, led by feedstuffs such as soybeans and corn.

Global economic recovery precipitated rising demand for energy. Prices of crude oil and natural gas began to climb in late 2020, picking up steam in the second quarter of 2021. Natural gas prices rose sharply in mid-2021, as did the price of fertilizers, since natural gas is a key input in fertilizer production.

The high cost of gas contributed to diminished fertilizer production in Europe and elsewhere.

Russia, Canada, China, and Belarus are the top four global exporters of fertilizer. In addition to rising energy costs, several other developments in these countries caused fertilizer prices to skyrocket. In November 2021, Russia introduced a six-month quota on exports of nitrogen fertilizers and complex

nitrogen-containing fertilizers. Around the same time, China banned exports of phosphate, a major component of commercial fertilizers, until at least June 2022. Furthermore, a spike in ammonia prices and some potash supply disruptions in Canada also contributed to the rise in fertilizer costs

Strong trade demand and higher energy prices led to rising transportation cost and added to supply chain problems, which were themselves a product of uneven Covid economic recovery. Year-to-date (January-March 2022) Baltic Panamax index values, a benchmark for the price of moving dry bulk commodities by sea, are about triple the level they were during the same period in 2019. The supply chain issues that have reverberated globally go far beyond higher freight rates, however, as container shortages and widespread shipment delays cascade downstream through many sectors. In particular, interruption in shipments of computer chips and machine parts threatens farmers ability to maintain and run production equipment, while delays in shipping of fertilizer and other inputs could impact spring planting.

Agricultural Commodity Market Dynamics

On an aggregate level, global wheat production has been adequate in 2020/21and only one percent below consumption requirements in 2021/22. However, wheat stocks among major global exporters have tightened in recent years as international trade has grown. Major exporters stocks in 2021/22are

forecast to be at their lowest levels in 10years, putting upward pressure on global prices. China is one of the leading countries ramping up imports, with import volume doubling in 2020/21as State Trading Enterprises helped replace and rebuild aging government reserves and demand for feed-quality wheat also surged.

For corn, strong demand, especially from China, has helped keep prices elevated. Robust feed demand propelled China to become the worlds largest corn importer in 2020/21, accounting for 16percent of global trade that year, up from an average of three percent in the preceding decade. Chinas import

demand in 2021/22remains well above historic norms. Stocks in major corn exporting countries (the United States, Brazil, Argentina, and Ukraine) are expected to be the lowest since 2012/13.

Soybean prices have been rising since late 2020, driven by aggressive purchases from China. Stocks in Argentina, Brazil, and the United States have tightened since then, rallying prices. For the current marketing year (2021/22), the worst drought in decades has affected parts of the soybean-producing

regions of South America during a critical crop development stage, reducing crop prospects and raising prices for beans, meal, and oil.

Vegetable oil prices have also been elevated, reflecting strong demand for soybean oil as a biodiesel feedstock, tight rapeseed oil supplies following Canadas small crop, and production issues and trade policies for palm oil from Malaysia and Indonesia.

Geopolitical Developments

Ukraine and Russia are important exporters of wheat, corn, barley, and sunflower oil and meal. Russias invasion of Ukraine has disrupted agricultural exports from the region and created uncertainties about Black Sea supplies, further driving up commodity prices and increasing market volatility. As uncertainty

builds about future supplies, some countries have implemented export bans or restrictions on their domestic supplies, further tightening global availability and adding additional upward pressure on prices.

As of April 5, 2022, 11countries have implemented export bans, including Russia, Belarus, Hungary, Serbia, Turkey, North Macedonia, and Egypt, for products ranging from wheat, wheat flour, barley, rye, corn, and oilseeds, to lentils, fava beans, and pasta.

Two major oilseed producers have implemented export restrictions. Argentina raised export taxes on soybean meal and oil from 31percent to 33percent. Indonesia raised the minimum percentage of palm oil output that processors are required to allocate to the domestic market from 20percent to 30percent, effectively limiting exports. These measures had a large impact on the vegetable oil and meal market since Argentina typically supplies more than 40percent of the worlds traded soybean meal and oil, while Indonesia accounts for more than half of global palm oil exports.

In response to rising food prices, several countries have relaxed import requirements or reduced duties to facilitate imports. Brazil, for example, has eliminated its import tax on ethanol.

Agro Perspectiva

< WFP appeals for access to encircled cities in Ukraine All news for
21.04.2022
Australia is expected to produce another big grain crop in MY 2022/23 after a record setting winter crop and strong summer crop production in MY 2021/22 >

18.09.2023  
13:55 Ukraine will sue Poland, Hungary and Slovakia over agricultural bans
15.09.2023  
21:02 Following the expiry of the restrictive measures on Ukrainian exports of grain and other foodstuff to the EU, Ukraine agrees to introduce measures to avoid a renewed surge in EU imports
13.09.2023  
17:54 Biodel AG Secures Series A Investment from Pangaea Ventures to Advance Novel Regenerative Agriculture Technologies
07:25 Rice Export Prices Highest in 15 Years as India Restricts Trade
11.09.2023  
17:54 Export Bans, Black Sea Tensions, Affecting Food Markets - WTO Agriculture and Commodities Division
09.09.2023  
18:36 Global cereal production forecast to match past record - FAO
14.08.2023  
13:22 EBRD provides EUR60 million guarantee to support lending by Ukraines PrivatBank
13:18 Supporting small business in the west of Ukraine via Bank Lviv
12.08.2023  
18:35 Russia Withdraws from Black Sea Grain Initiative
04.08.2023  
19:32 Falling international maize and sugar prices partly offset notable jumps in wheat and vegetable oil quotations
28.07.2023  
19:25 Cargill and partners announce first Gold Standard-approved methane emissions reduction methodology for beef producers
19:21 FAO welcomes European Union contribution of 25 million to advance wildlife conservation and food security
18:55 BASFs earnings in tough market environment significantly below strong prior-year quarter
24.07.2023  
00:45 Brazil continues to make export gains and set new records for beef, pork, and chicken meat
23.07.2023  
22:25 122 million more people pushed into hunger since 2019 due to multiple crises, reveals UN report
22.07.2023  
08:17 U.S. dairy exports to Southeast Asia have been weak to start 2023
13.07.2023  
07:00 Russia Exports Record Wheat Volumes; Ukraine Exports Plummet
08.07.2023  
09:00 FAO Food Price Index continued declining in June
06.07.2023  
20:10 Global agricultural and food production are projected to continue to increase over the next ten years
04.07.2023  
19:54 EBRD supports Ukrainian city of Dnipro with EUR25 million loan
09:03 Nibulon invests EUR 27 mln in construction of granary, flour mill in Izmail
23.06.2023  
08:57 World coffee production for 2023/24 is forecast 4.3 million bags higher than the previous year to 174.3 million
08:55 Mexicos Production Recovering from Coffee Leaf Rust
22.06.2023  
04:05 EBRD and Ukraine government to mobilise 600 million for Ukraine energy security
21.06.2023  
20:26 EBRD and Ukraine government to mobilise EUR600 million for Ukraine energy security
11.06.2023  
15:55 Argentina ramps up soybean imports from Paraguay and Brazil
10.06.2023  
04:35 World Oceans Day must be Humans Day: FAO Fisheries chief
09.06.2023  
11:24 EU extends trade benefits for Ukraine
05.06.2023  
11:25 2023/24 Grain Production Exceeds Consumption
02.06.2023  
11:45 Rebound seen for global cereal output, with worldwide stocks set to hit record levels
11:35 Significant drops in international quotations for wheat, maize, vegetable oils and cheese, while prices of rice, sugar and meat rise
01.06.2023  
11:56 Conflict Drives Acute Hunger in the Democratic Republic of Congo - UN agencies warn
31.05.2023  
12:29 Three New Foods and Their Applicable Food Safety Standards
30.05.2023  
11:55 Haiti: Nearly half of the population is facing acute hunger
11:34 Increasing risk of hunger set to spread in hotspot areas as the Sudan crisis spills over into subregion and el Niño looms - warns new UN report
28.05.2023  
12:51 Black Sea Grain Initiative not fully resumed UN
25.05.2023  
15:52 Ukrainian FM urges African Union to demand that Russia stop obstructing work of grain corridor
20.05.2023  
11:49 Grain initiative talks continue considering proposal of UN Secretary General Dpty Minister of Restoration
05.05.2023  
14:45 The FAO Food Price Index rebounded slightly in April
28.04.2023  
09:15 Yara . 1Q results impacted by falling prices, but tighter nitrogen market into 2Q
21.04.2023  
22:10 Ukraine sees no reason to ban Ukrainian grain imports by EU countries - Solsky
18.04.2023  
21:45 $5 million from FAO-China South-South Cooperation Programme will assist in building more resilient agrifood systems
21:05 China Becomes Worlds Largest Wheat Importer in 2022/23
14.04.2023  
09:52 EBRD and Spain join forces to support Ukraines food security and municipal sector
05.04.2023  
13:10 Astarta starts 2023 planting season
31.03.2023  
00:27 War in Ukraine continues to impact EU farmers
28.03.2023  
22:17 Ukraine sends 150,000 tonnes of wheat to Asia
12:00 Global onion prices are at record-high levels due to a global shortage of onions
12.03.2023  
06:17 It will enrich Egypt if a kilo of onions costs HUF 1,000
10.03.2023  
11:03 Plummeting Argentina Soybean Production Impacts Global Soybean and Products Trade

Also available: 


NewsNews - News - News - News - News - News
BriefWeekly Reports - Free article
SubscriptionTariff - News&Reports
AdvertisingMagazine - Site
ConferencesForum AGRO-2013 - DAIRY WORLD-2008 - FERTILIZERS-2010
Statistics
For our clientsAgroNewsDaily - Ukrainian Grain&Oilseed Market - Fertilizers - Milk Monthly - Milk Weekly
About usAbout project - Contact
2002 -2023 © Agrarika, ltd.
tel.: +380 67 4473802; +380 67 5964652
e-mail: client@agroperspectiva.com