Russia and Ukraine in crisis: implications for agricultural markets
Russia’s military invasion of Ukraine could potentially have significant implications for Ukraine’s agricultural exports. The magnitude and duration of the impact to Ukraine’s agriculture markets hinge on the severity of physical damage incurred during the war itself.
Ukraine is a large agricultural producer, ranking sixth in the world in corn production and fourth in corn exports. In addition, it’s also a major exporter of oilseeds like canola and sunflower, as well as grains like wheat, barley, and rye. Most of these products are exported to a globally diverse set of trading partners. Within Ukraine, agriculture—combining crop production, processing, and distribution—is a major industry, accounting for approximately 17% of Ukraine’s GDP. War within the country is expected to disrupt agricultural production and distribution. Global trade flows of crops Ukraine produces and exports are expected to shift materially, depending on the war’s duration and severity of physical damage to Ukrainian infrastructure.
Major crops and production in Russia and Ukraine
Russia and Ukraine share similar agricultural production characteristics, and both are major grain and oilseed producers and exporters. Wheat, sunflower seeds, barley, corn, and soybeans are the top five crops by area in both Russia and Ukraine. The top five crops’ acreage accounted for 80% of Russia’s total harvested farmland area (51 million out of its 64 million hectares) and 83% of Ukraine’s total farm area (22 million out of its 27 million hectares).
Russia and Ukraine are both major oil crop producers. Ukraine ranks first in the world in the production of sunflower seeds, oil, and meal, while Russia ranks second for all three categories.¹ Russia and Ukraine also are homes to the world’s largest two sunflower crush capacities. In addition, both Russia and Ukraine are important producers of major grain crops, ranking among the top 10 countries in terms of production and export volume for wheat, corn, and barley.
Agricultural trade
While most of the major grain crops and oilseed products produced in Ukraine are exported, Russia’s grain crop and oil cakes are primarily for domestic consumption.
Russia’s grain crop and oilseed products are primarily for domestic use while Ukrainian outputs are export oriented
Volume of grain crops and oilseed products destined for domestic and export markets in crop year 2021 (in thousands of metric tons)
Grain crops are the most important agricultural exports from both countries, generating $9.4 billion in Russia and $9.5 billion in Ukraine in 2020. Russia and Ukraine differ in grain crop trading partners. Russia’s primary grain export markets are concentrated in the Middle East and North Africa (MENA), with the region accounting for 57% of all grain crop exports in 2020. Ukraine’s trading partner profile for grain crops is more diverse, with important partners spanning East Asia, Europe, the MENA region, and the rest of the world. China is Ukraine’s largest grain crop market, importing $1.9 billion and accounting for 20% of Ukraine’s grain crop exports.
Russia and Ukraine differ in grain crop trading partners
Export destinations for Russian grain crops by value in 2020 (in thousands $US)
Export destinations for Ukrainian grain crops by value in 2020 (in thousands $US)
Oilseed crops and products are also significant agricultural exports for Russia and Ukraine. Russia exported $3.1 billion of oilseed crops and products in 2020, while Ukraine shipped out a combined $3.4 billion in these two categories. Russia and Ukraine share similar regional export markets, albeit different degrees of exposure. Russia’s primary export markets for oilseed crops and products are Eastern European countries and East Asia, primarily China, with less than a quarter of exports heading to other European countries. Ukraine’s trading partner profile for oilseed crops and products tilts toward European countries outside the Eastern Europe region, accounting for nearly 40% of all Ukrainian oil crop and oilseed product exports in 2020. Turkey is likely to be the single most affected oilseed crop and products importer by the military action in the Black Sea region, with 30% of its total oilseed crop and products imports reliant on Russia and Ukraine.
Oilseed crop and product trading partners vary between Russia and Ukraine
Export destinations for Russian oil crops and oilseed products by value in 2020 (in thousands $US)
Export destinations for Ukrainian oil crops and oilseed products by value in 2020 (in thousands $US)
Global grain and oilseed trading networks remain vulnerable to shocks
The likely loss of significant volumes of grains and oilseeds exported from Russia and Ukraine, especially sunflower seeds and products, may lead to shocks to the global grain and oilseed trading networks. The United States and Brazil, two of the world’s top producers for grains and oil crops, should see additional demand for their exports. In conjunction with the potential production disruption due to La Nina in South America, there could arise supply tightening for the upcoming marketing year, pushing up crop prices. Responding to market uncertainties, futures prices in the United States for corn have increased significantly over the last month, as have wheat and soybeans. On the flip side, agriculture input sectors are also bracing for impacts. The potential disruptions to fertilizer trade are also expected to have considerable impacts on the global fertilizer supply chain, adding upward pressure for fertilizer costs for producers, which will be combined with the surge in energy prices to broadly increase operating costs for farms around the world. The extent to which the increases in input costs are balanced against increases in crop prices will determine the impact of the crisis on the global farm economy.
1 USDA Foreign Agricultural Service Production Supply and Distribution, March 3, 2022.
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