Russia’s invasion of Ukraine has sent prices of food commodities—especially grains and vegetable oils—soaring. As the war in Ukraine is likely to last for several months at least, EIU expects prices of agricultural commodities to remain elevated for much of the year.
War engulfs the breadbasket of the world
Ukraine and Russia are prominent grain exporters and together account for 30% of global trade in wheat, 17% of maize and more than 50% of sunflower seed oil. Ukraine supplies about a quarter of the EU’s cereal and vegetable oil imports and about half of its maize imports. Roughly two-thirds of Ukraine’s grain exports and three-quarters of sunflower seed oil exports leave via the country’s Black Sea ports, many of which are now closed. Furthermore, on March 1st the world’s three biggest container lines—Switzerland’s Mediterranean Shipping Company (MSC), Denmark’s Maersk, and France’s CMA CGM—temporarily suspended cargo shipments to and from Russia in response to US and EU sanctions on the country.
Global prices for agricultural commodities have soared as a result, and we expect them to remain elevated as long as the conflict rages in Ukraine. Wheat futures reached a 14‑year high on March 1st as fears of a prolonged war between Russia and Ukraine triggered panic-buying. Maize futures also settled higher, and prices for soybeans and vegetable oils have been similarly affected. Palm oil prices have hit record highs as traders rush to secure alternative supplies in the absence of sunflower seed oil shipments.
We expect further supply disruptions in Ukraine, especially as land routes will also be affected. Roads will be made impassable by bombings and blockades, and heavy goods vehicles will be diverted to military uses. Rail lines are likely to be damaged and rendered inoperable. This will exacerbate the situation on the Black Sea, where ports will probably remain unusable for many months to come. Higher grain prices and disruptions in exports will also adversely affect livestock and meat markets globally.
Consumers face sharp price rises for food staples
The conflict will have a significant impact on global grain supplies, especially as stocks are already low. The war in Ukraine will also affect the upcoming sowing of crops in the country, which in turn will lead to supply shortfalls next year. Traders will look for alternative supplies from major producers such as the US, India and Argentina, but the necessary supply response will take time to materialise. We expect average grain prices to rise by almost a third this year, on top of the 40% increase recorded in 2021.
We now expect prices of sunflower seed oil to increase rather than fall in 2022, as originally forecast before Russia’s invasion; prices increased by nearly 60% in 2021.
Additional analysis and data on commodity markets can be found in EIU Viewpoint. This integrated solution provides essential information on supply, demand and prices of 25 key commodities. Learn more about EIU Viewpoint and how you can benefit from our world-class economic and political intelligence here.