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Russia’s invasion of Ukraine has placed further pressure on agricultural commodity flows, pushing prices higher and prompting longer-term warnings over food security and fertiliser availability. 

Together, Russia and Ukraine provide more than a quarter of the world’s wheat exports and a third of barley exports, according to research by agriculture-focused tech company Gro Intelligence. The two countries are also responsible for 76% of the world’s sunflower product exports, and 17% of corn. 

However, measures taken in Europe and the US to cut economic ties with Russia – including the imposition of sanctions as well as efforts by corporates and banks to reduce their exposure – are causing major disruption to those trade flows. 

“Russia and Ukraine are key suppliers of agricultural goods to regions including Europe, Asia and the Middle East, and the conflict could have devastating effects on global supplies,” says a report published last week by business intelligence provider Dun & Bradstreet. 

“Wheat prices have reached the highest level in the last 13 years. Additional price shocks would worsen rising food costs, particularly if key agricultural areas in Ukraine fall under the control of Russian troops.” 

Commodity prices have already been rising sharply in recent months, driven by a combination of supply shortages, demand imbalances, bottlenecks in transportation, high fuel costs and labour issues. 

Agricultural commodities are no exception, but as of press time, wheat prices have increased by a further third month-on-month, while corn is up around 13% over the same period, according to Trading Economics data. 

The most immediate impact is on countries that have a high dependency of Russian and Ukrainian exports. Dun & Bradstreet identifies 25 nations that import at least half of their wheat and meslin from one or both countries, including Turkey, Egypt and Azerbaijan. For Armenia, Benin, Georgia, Kazakhstan and Mongolia, the figure is close to 100%. 

Dun & Bradstreet suggests that wheat producers in the US, Canada and France could act as alternative sourcing markets, while Will Osnato, a senior research analyst at Gro Intelligence, highlights bumper crops in Argentina and India. 

“India has had a series of six consecutive record crops, so has built up a tremendous amount of supply,” he tells GTR. “It wasn’t really competitive economically to export that until the start of this high price environment a little over a year ago, but they’ve been shipping for about 14 months or so now.” 

But importing goods from further away adds additional cost to transactions, at a time when prices are already high. 

“It’s really squeezing these typical net importing countries,” Osnato says. 

Another complication with agricultural trade compared to other commodity flows is that goods are seasonal and perishable. 

“It’s not like oil, where you can store it and leave it, or turn off the tap and immediately start importing from somewhere else,” Baldev Bhinder, managing director at Singapore law firm Blackstone & Gold, tells GTR. 

“Imports have to coincide with planting seasons for grains, and producers need to decide in advance what particular crop they’re going to plant.” 

Those complications are exacerbated by concerns over the availability of fertiliser. Production of fertiliser has already been affected by rising energy prices, and restrictions on imports of certain components – such as nitrates and potash – could drive costs higher still. 

Dan & Bradstreet warns the crisis could “present food security issues for many countries”, adding to pre-existing inflationary pressures. 

“Russia’s invasion of Ukraine has exposed several geo-political fault lines: a breakdown in supply chains, inaccessibility of critical raw materials, and an impending commodity crisis,” it says. 

In a statement issued this week, Rebeca Grynspan, secretary-general of the United Nations Conference on Trade and Development (UNCTAD), highlights that disruptions will hit hardest in developing markets. 

“Soaring food and fuel prices will affect the most vulnerable in developing countries, putting pressure on the poorest households which spend the highest share of their income on food, resulting in hardship and hunger,” she says. 

“This is cause for great concern, as social and political stability and increasing food prices are highly correlated.”