February 24, 2022 marked the beginning of the war between Russia and Ukraine, a conflict that is now three years old. Both countries are strategic players in the Black Sea region and, mainly, in the supply chain of the agribusiness, significantly impacting the global sector.
Before the war, the combined foreign trade of Russia and Ukraine accounted for approximately 29% of global wheat exports, 19% of corn exports and 40% of sunflower oil.
Shortage and high prices of fertilizers
In the first months after the start of the conflict, the international market felt significant impacts, especially in the supply of essential fertilizers, such as potash, urea, diammonium phosphate and anhydrous ammonia. Russia is one of the three largest suppliers in this market, alongside Canada and Belarus (an important Russian political and commercial ally), which together control around 80% of the global fertilizer supply.
With economic and logistical sanctions imposed on Russia, fertilizer exports to several countries, especially in Europe, were suspended. Between 2022 and 2023, fertilizer prices doubled due to the shortage of Russian supply, resulting in a generalized increase in the cost of several commodities during the first year of the conflict.
Alternatives to Russian supply
The sanctions imposed by the European Union and the United States, combined with the temporary withdrawal of Russia and Belarus from the market, led fertilizer-consuming countries to seek alternatives from other suppliers, often at more assertive prices.
A study of the International Food Policy Research Institute (IFPRI) revealed that Belarusian potash exports fell by at least 50% in 2022 compared to the previous year, due to sanctions and restrictions on the transit of goods through the European Union. Russian exports of urea and potash, on the other hand, fell in the first eight months of 2022 compared to the same period in 2021, but recovered in the second half of the year. However, Russian ammonia faced an even more severe impact: exports fell by 63% between January and August 2022, as a result of the closure of the Tolyatti-Odessa ammonia pipeline, one of the main export routes.
Countries more sensitive to price variations, such as India and nations in Sub-Saharan Africa (SSA), faced difficulties in acquiring fertilizers on the international market due to high logistics costs and competition, maintaining part of their imports with Russian suppliers.
Impact on commodities
Another significant effect was the rise in the prices of agricultural commodities, especially wheat, corn and sunflower, crops widely produced in the Black Sea region and essential for global supply.
The conflict has intensified in eastern Ukraine, an area responsible for 21% of wheat production, 17% of barley and 19% of sunflower seeds grown in the country between 2016 and 2020. With the invasions in this region, many farmers have had their crops destroyed or have been forced to abandon their lands for safety reasons.
According to Ukrainian government data, cereal production fell by approximately 29% between 2021 and 2022, generating great speculation in the market. Before the conflict, Ukraine was the largest producer of sunflower, responsible for 50% of global sunflower oil exports, in addition to ranking third among the largest exporters of barley, with 18% of global exports, fourth in the corn market, accounting for 16% of global supply, and fifth in the international wheat trade, with 12% of global exports.
War impacts Ukraine's wheat exports and redistributes market
The outbreak of war rekindled concerns about a global food crisis, as Ukraine was responsible for 92% of wheat exported to developing countries. Logistical difficulties led to a sharp increase in the price of wheat, further pushing up inflation in wheat-based products.
Ukrainian wheat exports to sub-Saharan Africa fell from 10% before the war to 3% after the outbreak of the conflict, while shipments to North Africa fell from 53% to 34%.
On the other hand, with the creation of land transport routes promoted by the European Union, known as “Solidarity Corridors”, Ukraine’s share in European imports has increased considerably:
- Ukrainian wheat: share of European imports rose from 2% to 50%;
- Ukrainian corn: increased from 36% to 64%.
Impact on the sunflower oil market
Sunflower oil consumers also felt the effects of the war hard, as Ukraine was forced to reduce its market share right in the middle of the record 2021 harvest.
The first major challenge for the sector was production: many sunflower factories and plantations are located in eastern Ukraine, a region under Russian rule or under intense attacks. In 2022, sunflower crushing and refining units faced prolonged shutdowns – some lasting up to two weeks – due to Russian attacks that affected power supplies, forcing them to operate with limited generators.
The second major challenge was logistical: transporting seeds to factories and oil to ports became extremely expensive. To remain competitive, producers reduced their margins to the limit. With Ukrainian ports blocked by Russian vessels, alternatives were found through exports, mainly via Poland and Romania. However, this solution generated friction with neighboring countries, since Ukrainian sunflower oil arrived at lower prices than those of local producers.
Grain Corridor: A Temporary Relief
The launch of the grain corridor in July 2022 provided some relief to the market. This agreement, brokered by the United Nations and Turkey, allowed grain and part of Ukraine's oil production to be exported safely through three ports in the Odessa region.
During the one-year period of the agreement, Ukraine managed to export about 33 million metric tons of agricultural products, contributing to the stabilization of international prices. Wheat, corn and sunflower seeds were exported mainly to Europe and Turkey, which produced the oil and brought refined sunflower seeds to the market at more competitive prices.
Oil producers have also adopted innovative logistics strategies, developing safe transport routes by rail and truck to ports in Romania and Poland. As of June 2022, these measures have allowed the resumption of sunflower oil exports, helping to restore Ukraine’s position in the global market.
The impacts of the war between Russia and Ukraine continue to reverberate across the global economy, especially in agribusiness. The fertilizer market, commodity prices and international logistics have been deeply affected, and emerging solutions – such as new export routes and transport agreements – still face challenges. With the ongoing conflict, instability in the supply of grains and agricultural inputs is expected to remain a central theme in the coming years.
War and agribusiness: global challenges and adaptations
In addition to the challenges faced over the past three years, the ongoing conflict between Russia and Ukraine keeps global agribusiness in a state of uncertainty. Volatility in commodity prices, inflationary pressure on food, and logistical challenges continue to impact global supply, especially in more vulnerable regions such as Africa and South Asia. In addition, dependence on fertilizers and grains from these nations has reinforced the need for supplier diversification and new commercial strategies on the part of importing countries.
While initiatives such as the grain corridor and the “Solidarity Corridors” have provided temporary relief to the market, their effectiveness depends on political and diplomatic stability between the parties involved. The search for sustainable and long-term solutions to ensure global food security requires new investments in agricultural production, the development of logistics infrastructure and more robust trade negotiations.
In light of this scenario, the global agri-food sector must continue to closely monitor developments in the conflict, adapting to changes in supply, demand and international regulations. Resilience and innovation in agribusiness will be essential to mitigate the impacts of the war and ensure that global food security is not held hostage by geopolitical crises.
By Júlia Vilela, sunflower oil and olive oil specialist at Aboissa
Review by Vanessa Ferreira
