The invasion of Ukraine exacerbates the wheat crisis … and countries rush to find solutions

The war in Ukraine was barely a month old when Augusto Bassanini, CEO of the United Grain Company, received an unusual signal from the world wheat market.

The grain exporter in Washington, which is owned by the Japanese trading company Mitsui & Co. owned, usually ships its products across the Pacific to Asia.

But in March, an Egyptian importer who had not been involved with the United Grain Company for two decades seized 60,000 tons of wheat from the port of Vancouver in Washington, via the Panama Canal and across the Atlantic, thousands miles to be shipped from Egypt. main grain suppliers, Ukraine and Russia, and at a much higher cost.

It was a small sign, according to the Wall Street Journal, of the turmoil in global grain markets caused by Russia’s invasion of Ukraine, which threatened food supplies from one of the world’s most productive agricultural regions to some of its poorest countries.

From India to Ireland, governments are moving to fill a gap in the Black Sea region that could amount to tens of millions of tonnes of grain.

India has increased its wheat production for export

India has increased its wheat production for export

Those governments pay farmers to plant more crops and recruit railroads and additional containers to transport wheat.

Commercial giants like Bunge Ltd. and Archer Daniels Midland Corporation are exploring alternative ways to transport crops from Ukraine, where war fields have turned into battlefields, raising uncertainty about farmers’ ability to grow and harvest their crops.

Meanwhile, companies including ADM, Bayer AG and Cargill Inc. Currently working in Russia.

In the short term, it will be difficult for the rest of the world’s farmers to resist the recession, as Russia and Ukraine together typically account for more than a quarter of global wheat exports. Since the war began, the U.S. Department of Agriculture has lowered its forecast for global wheat trade this season by more than 6 million tons, or 3 percent, as expectations of lower Russian and Ukrainian exports have surpassed the expected increases elsewhere.

If hostilities continue into the summer, say agricultural managers and economists, crop shortages will keep prices high, jeopardizing food security in places such as the Middle East and North Africa, where rising food prices have contributed to political instability in recent decades.

Ukrainian wheat field before the war

Ukrainian wheat field before the war

Global food prices are already at record levels, and prices could jump 22 percent more as the war in Ukraine leads to stock shortages, according to the Food and Agriculture Organization of the United Nations.

A growing world population and growing incomes have stimulated more consumption, especially in low- and middle-income countries.

Wheat farmers have harvested about 550 million acres this season, according to USDA projections, making it the most cultivated crop in the world.

Wheat is a staple food for more than 35 percent of the world’s population, according to Zhou Dongyu, Director-General of the Food and Agriculture Organization of the United Nations.

Dan Bass, president of Chicago-based agricultural research firm AgResource Co., said that if the war continues until the end of the year, he expects combined wheat exports from Russia and Ukraine to fall by more than 60% next season.

Nearly 50 countries depend on Russia and Ukraine for more than 30 percent of their required wheat imports, according to the Food and Agriculture Organization. On average, Egypt, Turkey, Bangladesh and Iran get at least 60 percent of the wheat imported from the two countries.

Countries like Ireland are trying to boost local wheat farming

Countries like Ireland are trying to boost local wheat farming

alternative solutions

Non-Russian exporters, including Cargill and Louis Dreyfus Co. And Viterra, the grain company of commodity giant Glencore PLC, sent nearly 40 shipments of a total of about 1 million metric tons of ground wheat, maize, barley and flaxseed to a variety of countries from early February to April 29, according to Logistic Shipping Lines .OS, which monitors shipments of goods from Russian ports.

A Cargill spokesman said the company exports commodities where possible.

While Ukraine struggled to get its grain on the market, Russia expanded its exports.

Egypt’s wheat imports from Russia grew by 580 percent in March compared to last year, according to AgFlow SA, a Geneva-based crop data company, while Russian wheat exports to Iran, Turkey and Libya more than doubled.

However, higher export taxes, rising freight costs and a strong ruble will limit Russian exports in the coming months, especially from the country’s wheat crop in the second half of the year, according to analysts.

Exports of other grain-producing countries to the Black Sea, such as Bulgaria and Romania, also grew in March, according to AgFlow.

The company said shipments of wheat from South American countries, including Brazil and Argentina, had more than doubled, and shipments from Australia had risen by about 75%.

Wheat production did not increase in the United States

Wheat production did not increase in the United States

Ukrainian exporters, including ADM and Bunge, were able to ship small quantities of crops by rail and truck to Poland and Romania from the country, despite infrastructure restrictions to export in limited quantities.

Governments around the world are working to make up for lost grain supplies. In March, Ireland launched a nearly $ 11 million program to encourage farmers to grow more crops such as wheat, oats and barley, in the hope of reducing the country’s dependence on imported grain.

The European Commission has adopted measures aimed at improving global food security, such as temporarily allowing farmers to grow crops on land designated for conservation purposes. It also supports potential efforts to reduce the proportion of crop-based biofuels mixed with oil, and says its measures will enable farmers to spend more land on food production and increase the sowing of crops such as maize and sunflower.

The Biden administration last week asked Congress for $ 500 million to help boost U.S. crop production in an effort to address the global deficit.

The request, which was included as part of the administration’s $ 33 billion offer to help Ukraine, would go for higher US government lending rates to farmers growing crops such as wheat and soybeans, and to provide stimulus payments through crop insurance to lure farmers around the wheat harvest.

Many importers turn to India, the world’s second largest producer of wheat, where government officials are working to increase export capacity to meet the growing demand for the crop that is usually destined for domestic consumption.

This year, farmers are harvesting what is likely to be one of India’s largest wheat crops ever and are sending record quantities of grain, according to Indian agricultural consultants and CEOs.

Manish Kumar Gupta, managing director of Gujarat Ambuja Exports Limited, a major Indian grain producer and exporter, said he was receiving calls from importing countries he had not previously dealt with and was preparing 50,000 tonnes of wheat to ship to both Turkey and Indonesia for the first time.

Twenty-three countries are already imposing export restrictions on their crops.

Meanwhile, the world’s largest agricultural businesses have invested heavily in ports, grain elevators and processing plants in Ukraine, which is the world’s largest exporter of sunflower oil, and a major exporter of maize, wheat and barley.

In recent years, Ukraine’s planting of its six largest crops has covered 59 million acres, roughly the size of the area in Illinois, Indiana and Iowa, three of the largest farm states in the United States, according to Scott Irwin, an agricultural economist. at the University of Illinois.

Irwin said Russia, the world’s largest wheat exporter, ships four times the grain grown in Kansas, which is usually the largest wheat-producing state in the United States.

Drought has negatively affected the U.S. winter wheat crop, according to the U.S. Department of Agriculture.

This year, U.S. farmers are expected to cut spring wheat plantings by 2 percent from 2021 to plant a record area of ​​soybeans instead, according to a U.S. Department of Agriculture forecast last month.

The total area of ​​wheat for 2022 is expected to increase by just 1 percent, according to the USDA.

“It’s impossible to make up for the shortfall this year,” said Kenneth Zuckerberg, chief economist at Cuban Agricultural Bank, adding that space constraints, higher prices for other crops and drought are likely to limit long-term increases in U.S. wheat production. .

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