Bad news for Europe: Due to the war, the corn harvest in Ukraine could fall drastically. This will have a significant impact on food prices. Maize is also an important feed for pigs and other livestock.
The Black Sea research company SovEcon reportedthat Ukraine, one of the world’s largest grain exporters, will see a dramatic drop in production in crop year 2022 due to the Russian military operation. This will also have a significant impact on prices. According to this, the area under cultivation should drop by 900,000 hectares to just 4.6 million hectares and the crop yields per hectare should also fall by 1.5 tons to just 4.6 million. In the case of wheat, the decline in the harvest is not that severe, but it is still significant.
The main agricultural exports of Ukraine are corn and wheat. Before the invasion, Ukraine was the second largest supplier of grain to the European Union and one of the largest suppliers to emerging economies in Asia and Africa. In numerical terms, Ukraine produced 49.6 percent of the world’s sunflower oil, 10 percent of the world’s wheat, 12.6 percent of the world’s barley and 15.3 percent of the world’s corn. SovEcon therefore assumes that the corn harvest in Ukraine in 2022 will fall by 35 percent from 41.9 million tons last year to 27.7 million tons this year. The wheat harvest estimated for this year has been cut to 26 million tons from an earlier forecast of 28.3 million tons, compared to 32.1 million tons last year.
According to SovEcon, a company specializing in agricultural markets, conflict-affected regions account for 40 percent of the country’s corn and wheat production. Fuel shortages, labor and fertilizer shortages, and conflict-related problems in field work would affect plantings and yields. A weather-related drought component could also affect wheat-growing areas. However, the research firm believes Russia will reach a ceasefire agreement with Ukraine that will allow farmers to start field work in April. But if not… then it gets really critical. After all, corn is also an important feed for pigs and other farm animals.
However, as a result of these crop failures (and the export restrictions in Russia, Ukraine and other countries), there is a risk of a significant increase in food prices. According to UN estimates, global food prices could increase this year another 8 to 20 percent increase. Given that the FAO Food Price Index has risen from 50 to almost 140 points since 2000, setting a new record, this would be another price shock. This could destabilize even more countries (such as Iran, Bangladesh, Egypt, Pakistan or Turkey, which are heavily dependent on food imports).