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Tridge Analysis

Potential Disruptions in Agricultural Supply Due to the Russia-Ukraine Conflict

Updated Mar 23, 2022
Prices of agricultural commodities such as wheat, soybean, soybean oil, and corn have experienced rapid increases since the Russia-Ukraine conflict. The tensions in Russia and Ukraine will pose further anticipated disruptions in agricultural supply as Russia and Ukraine are both major players in agricultural trade. Due to the price surges and limited supply available, food security may become an issue. For example, Russia and Ukraine together supplied over half of the global sunflower seed oil supply, a quarter of the global wheat supply, and a fifth of the global barley supply in 2020. Furthermore, many countries will have to find alternative importers as Russian and Ukrainian demand for imported agricultural products may change.



Key Agricultural Commodities to be Affected

Russia and Ukraine are essential players in the global agricultural trade market. They are significant suppliers of sunflower seed oil, wheat, barley, oilseeds, corn, sunflower seeds, rapeseeds, rapeseed oil, and soybean oil. If the grain, oilseed, and oil supply experience difficulty reaching global markets, prices may increase faster. The current export restrictions on grain will inevitably tighten the global grain supply. The futures prices of corn increased by 28%, wheat by 38%, rapeseed by 26%, soybean by 26%, and soybean oil by 31% from Jan-22 to March-22. Due to the conflict, pressure on global food security from increased prices and a limited supply of agricultural commodities may occur.

In 2020, Russia (18% of global sunflower seed oil exports) and Ukraine (40% of global sunflower seed oil exports) supplied 58% of global sunflower seed oil exports (market size of USD 12.8 billion). China, Turkey, and India were major Russian and Ukrainian sunflower seed oil importers, with 95%, 85%, and 93% of their imports from Russia and Ukraine, respectively. The two countries supply most of the global sunflower seed oil supply. Alternative sunflower seed oil suppliers are Turkey (6% of total sunflower seed oil exports in 2020), Hungary (4% in 2020), and France (3% in 2020). Importers of sunflower seed oils are also seeking potential alternatives such as palm oil and rapeseed oil to substitute sunflower seed oil.

A quarter of the global wheat exports in 2020 were supplied by Russia (18% of global wheat exports) and Ukraine (8% of global wheat exports). The market share of Russian and Ukrainian wheat imports to Egypt, Turkey, and Bangladesh was 76%, 76%, and 67%, respectively. Other significant suppliers of wheat such as Canada (15.9% of total wheat exports in 2020), the United States (15% in 2020), France (10.6% in 2020), and Australia (6.2% in 2020), may face increased demand if Russian and Ukrainian wheat fails to reach the global market. In addition, temporary grain export restrictions in Russia and Ukraine may affect countries dependent on Russian grain exports.

Furthermore, 32% of barley imports in 2020 to Saudi Arabia, 37% of imports to Iran, and 58% of imports to Libya were supplied by Russia and Ukraine. The two countries combined provided 24% of global barley exports in 2020 (total barley exports in 2020 was USD 6.6 billion). Other significant suppliers of barley such as France (21% of total barley exports in 2020), Australia (14% in 2020), and Canada (9% in 2020).

Agricultural Products Imported by Russia and Ukraine

The major agricultural products that the two countries import include but are not limited to frozen fish, mandarins, oranges, grapes, fresh/chilled fish, lemons and limes, bananas, and grapefruit. Countries exporting agricultural products to Russia and Ukraine may have to search for new buyers due to decreased demand and trade regulations. This will inevitably lead to reshaping the supply chain.

Russia and Ukraine imported 27% of global frozen fish exports in 2020. 47% of frozen fish exports from Turkey, 23% of frozen fish exports from Iceland, and 14% of frozen fish exports from Argentina were exported to Russia and Ukraine. Furthermore, in 2020, 10% of exported mandarin went to Russia and Ukraine. 72% of Turkish mandarin exports, 84% of Georgian mandarin exports, and 40% of Argentine mandarin exports were destined to Russia and Ukraine. Also, 8% of the global grapefruit was imported by Russia and Ukraine. Russia and Ukraine imported 41% of the grapefruit exports from Turkey, 100% of grapefruit exports from Myanmar, and 58% of grapefruit exports from Poland.

Changes in demand or trade restrictions may force changes in the supply chain as exporting countries seek out new market opportunities. Industries that depend on exports are facing losses as they face challenges such as logistical disruptions, including shipment rejections in Russia. For example, the Icelandic and Argentine fishing industry is anticipating losses due to the conflict as a large portion of their fish supply is exported to Russia and Ukraine. Fruit exports from Turkey and Egypt commonly exported to Russia and Ukraine may reach new markets in Europe, adjusting to new supply chains in agricultural trade.

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