The conflict will have an alarming effect on agriculture across the world
Save time by listening to our audio articles as you multitaskToday Russia and Ukraine, respectively the largest and fifth-largest wheat exporters, together account for 29% of international annual sales. And after several poor harvests, frantic buying during the pandemic and supply-chain issues since, global stocks are 31% below the five-year average. But this time it is the threat of embargoes from the West that has lit a bonfire—and the flames are higher than even during the Great War.
Alternative sources are unaffordable. Last week Egypt cancelled its second wheat tender in a row after receiving only three offers—at a stomach-churning price—down from 20 a fortnight before. More concerning still, exports of corn, of which Ukraine accounts for nearly 13% of global exports, usually take place through the spring until the early summer. Much of it is normally shipped from the port of Odessa, which is bracing for a Russian assault.
In Russia the risk is not curtailed production but blockaded exports. Although food sales are not yet subject to sanctions, Western banks are reluctant to lend to traders. Fear of being fined by governments in the West or shamed by its press is keeping merchants at bay. While Ukraine is “unreachable”, Russia is “untouchable”, says Michael Magdovitz of Rabobank.
Meanwhile higher fertiliser and energy costs will crimp farmers’ margins everywhere. Brazil, a huge producer of meat and agricultural products, imports 46% of its potash from either Russia or Belarus, says Cristiano Veloso of Verde AgriTech, a Brazilian startup. Eventually some of the costs will be passed on to the consumer.
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