Due to the Russian invasion of Ukraine, food prices worldwide could rise by 8-22 % from their current high level. Such a forecast is included in the Food and Agriculture Organisation of the United Nations (FAO) message. Russia and Ukraine are among the largest producers of agricultural products globally. The total share of the two countries in the world supply of barley is 19 %, wheat – 14 %, maize – 4 %. This means they account for more than a third of the world’s grain exports.
The report also notes that these countries are world leaders in the supply of edible oil, owning 52% of the sunflower oil market. In addition, Russia is the world’s largest exporter of nitrogen fertilisers and the second-largest supplier of potash and phosphate fertilisers.
According to the report, this will be felt especially by about 50 countries that buy more than 30% of their grain from Russia and Ukraine. Many countries in Europe and Central Asia still depend on Russian mineral fertiliser supplies for more than 50 %. In contrast, nitrogen fertiliser exports are limited to a quota that can be met next year.
By February 2022, global food prices had already reached historically high levels due to strong demand, higher input and transport costs, and disruptions at ports, the report said. Wheat and barley, for example, increased in price by 31% last year, while rapeseed and sunflower oil prices rose by more than 60%. Strong demand and the volatility of natural gas prices have driven up the cost of mineral fertilisers. In particular, prices for the most important nitrogen fertiliser – urea – have tripled in 12 months. Russia’s war against Ukraine further exacerbates the situation.
Grain harvesting will start as early as June, but it is not yet clear whether Ukrainian farmers will be able to harvest it and bring it to market. At the same time, access to Ukrainian ports on the Black Sea is being blocked. The high cost of sea transport is now compounded by the increase in insurance costs in the Black Sea region. These costs are being covered by an increase in the price of imported food, say UN FAO analysts.
The organisation notes that the financial sanctions imposed on Russia have led to a sharp depreciation of the rouble, and further depreciation may limit productivity and growth, ultimately leading to higher prices for agricultural products. The supply prospects for sunflower oil are also unclear, so the leading importers of sunflower oil, including the EU, will have to look for alternative suppliers or switch to other vegetable oils.