Ukraine-Russia Conflict & Agriculture
The Ukraine-Russia tension has escalated further during this past week, and it is important to see how the current tension (and where it may lead) could affect the agriculture industry. Did you know that Ukraine is a key factor of agriculture globally? 70 percent of the country is covered in agricultural land. According to Sara Schafer of AgWeb Farm Journal, “In 2020, Ukraine’s agricultural sector generated approximately 9.3% of GDP.” Schafer continued, “Crop farming, which accounts for 73% of agricultural output, dominated Ukrainian agriculture, according to the International Trade Administration.” Ukraine mainly produces sunflowers (they are 1st globally in sunflower seed production), corn, wheat, barley, and soybeans.
If the tension between Russia and Ukraine leads to any disruptions in trade, the effects could be felt globally. This year, Ukraine is predicted to account for 19% of rapeseed, 18% of barley, 16% of corn, and 12% of wheat exports. Most of their exports are shipped in the fall, with the exception of sunflower seed oil being shipped mostly year-round. If spring planting is disrupted, major concerns will arise. If the tensions turn for the worse, it will likely cause a spike up in agricultural commodity prices because of how large of a wheat producer Ukraine is. The length of the spike would most likely be determined by how long the potential conflict would last.
With the recent news that Russia has invaded Ukraine, it is likely that we will see an increase in agricultural help from Americans farmers to help cover what Ukrainian farmers may not be able to provide. Isabel Debre from the Associated Press (AP) stated on February 19th, “During a trade mission to the United Arab Emirates, U.S. Secretary of Agriculture Tom Vilsack told The Associated Press that a conflict in Ukraine would present an ‘opportunity, obviously, for us to step in and help our partners, help them through a difficult time and situation.’”
The concern for agricultural exports is that Russia will choke off Ukraine’s export of grains. The rising tension between Russia and Ukraine was a factor, along with pandemic reasons, in supply chain backups and spikes in fertilizer and farm equipment costs. This all helped push wheat prices to a high level last year, according to Debre. Ukraine mainly exports wheat to South Asia, Europe, Africa, and the Middle East. Many of the countries in these regions depend on those wheat imports to provide for their populations in poverty. Tom Vilsack stated, “I wouldn’t expect and anticipate that American consumers are necessarily going to see a direct impact, but European consumers, I think that’s a different story.”
Russia is also a large producer of wheat. About 70% of Russia’s wheat exports go to the Middle East and Africa, meaning these two regions may really take a big hit on their wheat imports. According to Keith Good from the University of Illinois, “around 29% of global wheat exports, 19% of world corn supplies, and 80% of world sunflower oil exports” are accounted for by Russia and Ukraine. The lack of supplies from Russia and Ukraine will likely lead to a rise in demand from the United States and Canada. Looking back to fertilizer, “Russia is one of the world’s biggest exporters of all three major groups of fertilizers,” Good stated. If the supply of these supplies is cut any further, increases may occur in already high nutrient prices.
The current conflict in Ukraine could lead to an opportunity for the United States to boost their trade relationship with China and the Middle East, due to the additional exports that are expected to come from the United States. The U.S. is already a major exporter to these two regions.