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

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 >

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
10:15 Argentina Drought Cuts Corn Exports with Lowest Global Trade in Three Years
03.03.2023  
15:25 Early production outlook for 2023 wheat crops
14:05 FAO Food Price Index declines for the 11th consecutive month
02.03.2023  
15:55 Malaysias vegetable prices set to soar again due to wet weather
12:23 FAO outlines three pillars of action for initiatives in Ukraine in 2023
11:25 The Latin America and the Caribbean has the highest cost of a healthy diet compared to other regions
11:15 Pistachios. Global production for 2022/23 is forecast to 791,000 MT
01.03.2023  
10:46 Kharkiv Dairy Plant continues to produce dairy products thanks to generator received from Government of Germany
23.02.2023  
15:57 Ukraine seeks to extend "Grain deal" for 12 months year to involve more ports - deputy minister
15:53 Vegetable prices were constantly rising over past two weeks
15:33 ICMSA say suspicions growing around fertiliser sellers reluctance to quote prices for orders
22.02.2023  
14:35 Finland supports Ukraines grain exports
16.02.2023  
08:13 U.S. Soybean Oil Exports Forecast at Record Low
09.02.2023  
10:11 Brazil and the United States Vie for Worlds Top Corn Exporter
01.02.2023  
00:30 Asia-Pacific. In 2021, 396 million people in the region were undernourished - a new report by four UN agencies
30.01.2023  
10:05 Global chicken meat production for 2023 is virtually unchanged from the October forecast at 102.9 MMT
27.01.2023  
17:49 South Africa exports of tangerines/mandarins are forecast to grow by almost 8 percent in 2022/23
15.01.2023  
08:36 Israels planted citrus area in MY 2022/23 is forecast to be 16,200 ha
08:03 Record South American Soybean Supplies Forecast Despite Falling Argentina Crop
07:35 China Total Meat Imports Forecast Higher in 2023
13.01.2023  
06:26 U.S. Sorghum Exports Fall Precipitously
07.01.2023  
19:25 World food prices dip in December. FAO Food Price Index ends 2022 lower than a year earlier
04.01.2023  
16:50 A $15.5 million EU-funded project aims to respond to disruptions to the agricultural sector caused by war
22.12.2022  
15:15 Somalia: FAO calls for fully funded, at-scale and sustained life-saving and livelihoods support to pull people from the brink of famine
12.12.2022  
23:32 Burma importing soybean meal to grow aquaculture industry
10.12.2022  
09:37 Argentina wheat exports fall while Australia soars
09.12.2022  
20:32 Record India Soybean Meal Premiums Disrupt Trade Flows
04.12.2022  
17:09 Global cereal production and trade forecast to fall to three-year lows
17:06 45 countries need external assistance for food
16:37 Global food prices overall hold steady in November
01.12.2022  
04:16 Cargill announces acquisition of Owensboro Grain Company
03:14 FAO and Pacific nations weigh local innovations as solutions to growing climate and nutrition challenges
02:37 Global Environment Facility tasks FAO and IFAD to lead new $230 million agrifood systems transformation program
02:15 Cargill Appoints Brian Sikes as President and Chief Executive Officer, and Dave MacLennan as Executive Chair of the Board
23.11.2022  
05:44 Australia sugar production for 2022/23 is estimated to rise slightly to 4.4 MMT
21.11.2022  
07:54 U.S. provides up to $20 mln for Grain from Ukraine initiative
07:25 Grain from Ukraine program foresees provision of at least 5 mln people with grain until end of spring 2023
16.11.2022  
10:02 World sugar production - 179.6 million tonnes - FAOs preliminary forecast

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