International

How the Ukraine-Russia conflict is impacting global commodity exports

From animal feed to fertilizer, analysts share what (and where) will be put under pressure.
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· 4 min read

The Russia-Ukraine war is putting pressure on the world’s supply of commodities like grains and oilseeds, though some may feel the crunch sooner—and more drastically—than others, analysts say.

Globally, Russia and Ukraine account for about 26% of wheat exports, 16% of corn exports, and 80% of sunflower-seed meal and oil exports, per the USDA, plus essential components for soil. So the loss of commodities from the two countries could have effects down the food chain.

Homegrown: In the US, the “most immediate and most visible” effect for producers across the “big three” (corn, wheat, and soybeans) will be price, according to Stephen Nicholson, global strategist for grains and oilseeds at Rabobank. Corn prices hit a decade high at the onset of the war, rising to ~$7.48 per bushel, up $3 from last year, per CNBC.

  • But higher costs didn’t start with the conflict, he noted to Retail Brew. Domestically and globally, commodities prices were already boosted due to high demand (partly from a “Covid hangover”), but the war “magnified that situation even more,” Nicholson said.

US manufacturers, at least, are “self-sufficient” in these products, and there isn’t a current shortage of grains and oilseeds stateside, Nicholson added. Most food companies have established long-term contracts—they could have anywhere from three to 12 months of coverage, he explained—for ingredients, likely during harvest season in the late summer or fall of last year, when prices were cheaper.

  • Ongoing issues like securing freight, labor, truckers and packaging may be top-of-mind for these companies right now, according to Nicholson.

“Food has not been any of the sanctioned things,” he said. “And grain will move. It just won’t move as effectively. Grain is kind of like water; it will find its way through the cracks to get where it needs to go.”

Should the conflict continue long-term (reports suggest ceasefire talks are progressing), Nicholson said supplies may tighten and global buyers could eye the US, Australia, Europe, or South America to secure the ingredients they’d typically get from Ukraine and Russia.

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  • Particularly within oilseeds, canola oil was already facing a shortage due to last year’s Canadian drought, so food companies might explore alternatives like palm, soybean, and corn oil, he said.

Feeding frenzy: That Canadian drought had effects overseas, too, which have now been heightened by the war.

In the UK and EU, the long-term impact could be felt in the animal-feed sector, according to Peter Collier, senior market analyst at CRM AgriCommodities. Collier said “end users” like purchasers and supermarkets have been trying to reduce their reliance on soy, switching instead to canola or sunflower, both sourced from the Ukraine.

  • Now, Collier said it’s unclear how fieldwork in Ukraine will progress and if spring plantings will occur for these crops.

The UK and EU will also face challenges importing corn, sourcing more than 50% from Ukraine. That could lead to a “double-edged sword” where compounders turn to wheat and barley for feed instead, creating less of a surplus to export (plus higher prices), Collier said.

Soiled: An additional obstacle? Crops, of course, need fertilizer, which has seen “enormous price increases,” he noted.

China’s fertilizer export ban in October squeezed supply. Now, trade with Canada, the world’s largest exporter of potash, a major component in fertilizer, is being threatened—just before the spring planting season—by a potential Canadian Pacific Railway strike, explained Kathy Mathers, VP of public affairs at The Fertilizer Institute.

  • The conflict will only exacerbate the situation, she said, as Russia supplies 23% of ammonia exports globally and 21% of potash exports.

In the US, most fertilizer has been secured for the spring planting season, or is at least in North America, though the fall planting season could be another story, she said. Zooming out, she said tight supplies means growers may need to plan further ahead.

“It may require growers to try to anticipate what their needs are going to be and build in perhaps some additional transportation time,” Mathers said. “Because trade patterns might be changing.”

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