Ukraine and global agricultural markets two years later

Two years after Russia launched its full-scale invasion of Ukraine on February 24, 2022, the war continues to disrupt agricultural production and trade in Ukraine—one of the world's largest agricultural exporters—and poses an ongoing threat to global food security. Yet global commodity markets have adjusted to these disruptions, in part to due to increased exports by other suppliers, including Russia, easing the initial shock. After peaking in the wake of the invasion in 2022, prices for wheat, corn (maize) and soybeans have fallen below pre-war levels, though they remain above pre-COVID levels.

The war has adversely affected Ukraine crop production

Russia’s military occupation of Ukraine’s eastern flank has had the most direct and significant impact on Ukrainian agricultural production. Active fighting, Russian mining of agricultural fields, unexploded munitions, chemical contamination, and other problems have all contributed to the abandonment of farmlands. According to the U.S. Department of Agriculture (USDA), the occupied regions of Donetsk, Luhansk, Kherson and Zaporizhzhia accounted for about 21% of wheat, 17% of barley, 14% of rapeseed, 9% of soybeans and 19% of sunflower seed produced in Ukraine during 2016-20. (Very little corn is grown in the occupied areas.) NASA Harvest, NASA's Global Food Security and Agriculture Consortium, estimates that the amount of abandoned cropland in Ukraine in 2023 due to the war is equivalent to about 7.5% of the country’s total.

The war has also affected production across Ukraine in various indirect ways. Increased transportation costs, for example, have made it more expensive to move grain and other agricultural products to export market, and raised the costs of imports. Most of such added costs have been absorbed by Ukrainian producers in the form of lower prices for agricultural goods and higher prices for imported inputs such as seed and fertilizer.

Overall, Ukraine’s farmed area has declined. USDA estimates that the harvested area for wheat, corn (maize), and barley for 2023/24 is down 32%, 27%, and 37%, respectively, from 2021/22 levels (Figure 1). Sunflower area is down 15%. The combined area for soybeans and rapeseed has increased 21%, but net area for all six crops is down 19.5% over the past two years. (USDA estimates exclude statistical data on the occupied regions). According to a recent Ukrainian agriculture ministry survey, Ukrainian producers are expected to further cut corn plantings in 2024/25 but increase oilseed area, especially soybeans and rapeseed.

Figure 1

Impacts on trade

The outbreak of war had a dramatic immediate impact on Ukraine’s agricultural exports (Figure 2). Shipping out of Ukrainian Black Sea ports came to a halt in the week leading up to the invasion, as shipping lanes were mined and Russian ships patrolled sea lanes. While Ukraine had shipped most of its wheat and barley harvested the previous summer by late February 2022, about 40%-45% of the corn harvested the previous fall remained to be shipped. With Black Sea shipping halted, exports were transported overland by rail, truck, and barge through Poland, Hungary, Slovakia, and Romania to destinations in Europe and to Romania's Black Sea port of Constanta.

Figure 2

Using these so-called "Solidarity Lanes," Ukraine was able to export 1-2 million metric tons (MT) of grain per month, primarily corn, about one third of the level that would typically be shipped during that period. As the harvest of fall-planted crops began in spring, Ukraine producers faced storage constraints which, combined with higher transportation costs, drove down local grain and oilseed prices. As many sunflower seed crushers were located near blocked Black Sea port facilities, many exporters found it more profitable to export the oilseed rather than the oil and meal components.

The Black Sea Grain Initiative (BSGI), brokered by Türkiye and the United Nations, went into effect on July 22, 2022, allowing Ukraine to resume export of grains, oilseeds, and other agricultural products out of three ports around Odesa. Monthly export volumes more than doubled, easing storage constraints at a critical juncture when the fall harvest began. By February 2023, grain exports were approaching pre-war levels. However, the BSGI was always precarious; Russia temporarily suspended the agreement in November 2022 and then repeatedly threatened to pull out in 2023 before finally terminating it in July 2023. Nonetheless, over the 12 months the BSGI was in effect, Ukraine shipped nearly 33 million MT of grains and other agricultural products from its Black Sea ports, contributing to a decline in international prices of staple foods and helping to sustain global food supplies.

Following the BSGI’s termination, exports dropped sharply in the late summer and early fall as exporters sought alternative routes. However, Ukraine's military success in the Black Sea has helped it to re-establish a "Humanitarian Corridor" that allows shipping of agricultural products from Black Sea ports. By late fall 2023, export volumes had rebounded significantly to near pre-war levels. 

The war has shifted Ukraine export patterns, particularly for wheat. Disruptions to Black Sea shipping routes have resulted in more Ukraine exports going to Europe and less to regions such as sub-Saharan Africa or Asia. Less than 2% of total Ukraine exports wheat exports went to European markets from January 2021 to February 2022, but since then, European markets have received 52% of total wheat exports (Figure 3). Countries in the Middle East and North Africa (including Türkiye) remain large markets for Ukrainian wheat, though their share of exports over the same period has dropped from 50% of total Ukraine exports in 2021 to 29% in 2023. The largest impact has been felt by sub-Saharan Africa, which accounted for less than 3% of Ukraine’s total wheat exports in 2023, compared with 11% in 2021; and to South and Southeast Asian markets, which saw export shares drop from 32% in 2021 to 16% of total wheat exports in 2023.

Figure 3

The war has also seen a shift in corn exports to Europe (Figure 4). About 58% of total corn exports from Ukraine went to European markets in 2023, compared with 33% in 2021. Corn exports to MENA countries including Türkiye dropped from 25% of total exports in 2021 to 20% in 2023. Corn exports to East Asia (primarily China) accounted for 35% of total corn exports in 2021 but that share had fallen to 22% for 2023.

Figure 4

Diverted Ukrainian agricultural exports ending up in neighboring countries is an ongoing source of controversy, triggering strong farmer protests in Poland, Slovakia, Hungary, and elsewhere. In May 2023, the European Commission negotiated an agreement between Ukraine and five European Union member states (Bulgaria, Hungary, Poland, Romania, and Slovakia) to limit imports from Ukraine (Figure 5). In January 2024, the EU proposed to continue tariff free/quota free access to Ukraine exports, but has also agreed to implement safeguard provisions to guard against import surges. In recent months, exports have fallen back to pre-war levels, though farmers continue to protest shipments from Ukraine through Poland and other Eastern European countries.

Figure 5

Impacts on global markets

When the war began, there were immediate concerns about its potential impacts on both Ukraine and Russia exports and disruptions to global commodity markets. But fears of supply shocks and high prices largely subsided after initial spikes.

In the months following the invasion, prices for corn, wheat and soybeans spiked to record (nominal) levels (Figure 6)—but they have since declined significantly. Wheat prices are currently 45% below their peak in May 2022 while corn and soybeans are down 42% and 24%, respectively, over the same period. Their decline can be attributed to several factors. Russia had back-to-back record crops of wheat in 2022/23 and 2023/24, contributing to record wheat exports. The reopening of Odesa ports under the BSGI allowed Ukraine to export substantial quantities of grain and oilseeds. Meanwhile, increased wheat exports from the EU, Australia and Canada as well as increased corn exports from North and South America have enabled importers to find alternative suppliers. As a result, prices are well below pre-war levels, though they remain 25%-30% above January 2020 levels. As pointed out in previous posts, local prices in some countries may remain high due to weak local currencies.

Figure 6

Overall, despite the declines in Ukraine wheat exports, global wheat exports in 2022/23 exceed year earlier levels, largely due to increases from the EU, Canada, and Russia—which saw record export levels in 2022/23 and which USDA projects will see record levels again in 2023/24 (Figure 7). Decreased wheat plantings in Australia due to El Niño will reduce exports in 2023/24, but global exports are projected to fall just 4% from 2022/23, still almost 4% higher than 2021/22 levels.

Figure 7

Global corn exports in 2022/23 fell by 12% from 2021/22 levels, largely due to a one third drop in U.S. levels that year (Figure 8). USDA estimates that corn exports will rebound in 2023/24 due to increases in from the U.S. and Argentina—where corn exports are estimated to increase more 70% over last year's La Niña-affected totals.

Figure 8

Global stocks (excluding China) for corn and soybeans have increased over the past two years, reflecting more favorable weather and increased global production (figure 9). Wheat markets, by contrast, have continued to tighten; as noted in an earlier post, lower stocks account for the relatively higher levels of price volatility in the wheat market compared to that of corn and soybean.

Figure 9

Conclusions

Ukraine's agricultural producers continue to show remarkable tenacity in the face of hardships brought on by the war. Even as the country’s role as an important supplier of grain and oilseeds has been harmed by occupation, military engagements, and sabotage, it continues to be a significant source of grains, oilseeds and other agricultural products for consumers around the world. Global suppliers will need to continue to make up for the shortfalls in Ukraine production and exports which, at least in the case for wheat, will keep markets tight and vulnerable to a large production shortfall elsewhere.

Unfortunately, after two years the prospects for peace and a return to normalcy still appear slim. Meanwhile, the global trade picture remains uncertain: As the past two years have shown, policies such as export bans on rice, sugar, or vegetable oil, or the recent disturbances in the Red Sea, have exacerbated price volatility, often compounding the market impacts of the war. Maintaining a well-functioning, responsive global market remains critical to ensure that food is delivered to importing countries, particularly those least able to absorb price shocks.

Joseph Glauber is a Senior Research Fellow with IFPRI's Markets, Trade, and Institutions (MTI) Unit. Opinions are the author's.