Ukraine crisis: Higher grain prices until late 2023

Millions of tons of grain trapped in Ukraine
calendar icon 20 June 2022
clock icon 3 minute read

Editor’s note: Excerpts from the Farm Journal webinar Farm Country Update: The Effects of Ukraine on Global Agriculture

Ukraine is one of the world’s leading producers of grains, particularly wheat, barley and corn. During the Russian military invasion of Ukraine, in February of this year, Ukraine’s Black Sea ports were shut down or damaged, which trapped 25 million tons of grains from the 2021 harvest which cannot be shipped. This had an immediate effect on world grain prices and stock levels.

Ukraine’s grain system is focused on shipping to and through the Black Sea ports, according to Yevhenii Tkachenko, agricultural expert from Ukraine. The grain silos and storage facilities at the ports are fine, he said, but until those ports are opened again, those 25 million tons of grain can’t be easily moved.

High Grain Prices

The bottom line of this crisis is that “we’re not going to run out of wheat, it’s just going to be more expensive,” until at least the northern hemisphere’s fall harvest of 2023, said Dr. Jim Glauber, former USDA official and currently with the International Food Policy Institute.

In Tkachenko’s discussions with Ukrainian grain producers, those farmers say they won’t be harvesting their 2022 crops. Because the Ukrainian grain production and transportation system is geared for shipping to and through the Black Sea ports, the farmers don’t want to incur the expense of harvesting something that won’t be shipped.

Overland grain shipping won’t work, Tkachenko said. Neighboring countries are encouraging land transport to get the grain to other European ports where it can be shipped. But Tkachenko noted that trucks can carry 40 tons of grain and there’s 25 million tons waiting to be shipped, so it’s not a feasible idea.

Until those Black Sea ports are opened, Ukrainian grains aren’t going anywhere, and grain costs for the whole world will remain high, said Jim Wiesemeyer from Pro Farmer. Wiesemeyer believes the situation with Black Sea ports will have to be confronted at some point, although the US isn’t involved in that process at this time.

There will still be enough grain, especially wheat, to meet worldwide demand, Glauber noted, although costs are high and will remain so for more than another year. However, if Russia’s the war on Ukraine goes on beyond 2023, then the worldwide grain situation will change for the worst, he said.

Low Grain Stocks

Glauber emphasized that, discounting China (which always seems to be an unknown factor in terms of grain production), current worldwide grain stocks are at their lowest point since 2007/2008.

Glauber said that although the high grain prices have affected some countries already, the biggest region impacted is the Middle East and North Africa, as they are huge wheat consumers. Wheat accounts for 35% of the calories consumed in that region, and 70% of that wheat comes from the Black Sea region — Ukraine and Russia.

In terms of feed production for animal agriculture, livestock and poultry producers have not really been affected yet, but higher grain prices will catch up to them and squeeze the profit margins in that sector, Glauber concluded.

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