Posted on March, 18, 2022 at 09:11 am
The International Grains Council says the conflict between Russia and Ukraine resulting in a spike in agricultural commodity prices has fuelled concerns about potential food security risks
THE Ukraine conflict, which has seen a drop in grain exports leading to higher agricultural commodity prices, is raising concerns about food security risks, especially in import-dependent countries in Africa and Asia, according to the International Grains Council.
In a monthly report focused on the conflict, the London-based council said the immediate threat centred on the disruption to export flows, while in the longer-term, crops could be impacted due to fertiliser constraints.
While commercial Black Sea port loadings are still halted in Ukraine, there are efforts to increase exports via rail, although overall volumes are likely to be limited, it said, adding that an export licencing system had been recently introduced for wheat, corn and sunflower seed oil, while shipments of barley, rye, oats and millet are currently banned.
“While the extent of infrastructure losses is unknown, potential damage to port facilities, railroads and storage silos could impact shipments over the longer term,” it said
“In addition to tight availability of fuel, farm inputs and labour, access to some fields is currently impossible, leading to mounting worries about farmers’ ability to fertilise winter crops and plant spring varieties.
“The conflict has heightened concerns about tight global fertiliser supply chains, stoked by restricted shipping operations to the region, as well as latest sanctions on Russia and Belarus, respectively two of the world’s leading suppliers of nitrogenous and potash fertilisers.”
It added that the spike in natural gas prices, a key feedstock in nitrogen fertiliser production, has also contributed to recent price gains.
“With elevated input prices and tight availabilities already a concern before the hostilities, the rising costs of production could impact upcoming acreage decisions and application rates, with possible implications for global yields and crop quality.”
Most of Russia’s Black Sea terminals were however operational as of mid-March, the IGC said, with some ongoing restrictions in the Azov Sea.
Some loadings had recently resumed, although volumes may be hampered by trade finance restrictions and additional ocean freight insurance requirements.
There are reports that the Kremlin may ban the export of wheat, rye, barley and corn from March 15 to June 30, further crunching supplies.
US grains producer and trader Cargill has said it would scale back its business activities in Russia and has “stopped investment,” although it would continue to operate its “essential food and feed facilities” there.
“Food is a basic human right and should never be used as a weapon,” it said. “This region plays a significant role in our global food system and is a critical source for key ingredients in basic staples like bread, infant formula and cereal.”
According to the IGC, additional exports from other origins, including India, the US, the European Union and Brazil, will likely only partially offset lower Black Sea shipments over the remainder of the current season.
With high prices expected to ration demand, the 2021/22 global wheat and corn trade is forecast to fall short of earlier predictions, while uncertainties prevail for the 2022/23 season, it said.
“The crisis has already sparked a number of policy responses in other countries, heightening fears about rising protectionism and the potentially adverse consequences for food insecure nations,” the IGC said.
“Additionally, broader market turmoil and downside risks to global economic growth could also affect supply and demand dynamics, while rising crude oil and commodity prices may further fuel inflationary pressure.”
Source: LLOYDLIST