Home Indiana Agriculture News Fertilizer, Grain Prices Could See Additional Price Increases From Ukraine War, Says...

Fertilizer, Grain Prices Could See Additional Price Increases From Ukraine War, Says Report.

SHARE

Russia’s invasion of Ukraine could raise grain prices as much as 20% while boosting fertilizer prices another 13% and further inflating food costs, according to the U.N. Food and Agriculture Organization (FAO).

In a report issued Friday of the war’s impact on global food supplies, FAO estimates 20% to 30% of Ukraine’s winter wheat, corn and sunflower crops may not be planted or else go unharvested this year, and yields of remaining crops may be reduced.

FAO says rising energy costs due to the war will increase farm input costs in the near term and could lead to lower input usage and depressed crop yields in 2022, resulting in “further upside risk to the state of global food security in the coming years.”

While the war’s “intensity and duration remain uncertain,” the “likely disruptions to agricultural activities of these two major exporters of staple commodities could seriously escalate food insecurity globally, when international food and input prices are already high and volatile,” FAO Director-General QU Dongyu said in a statement accompanying the report’s release.

FAO economists evaluated the war’s potential impact on global food security based on “moderate” and “severe” scenarios, depending on how much exports from Ukraine and Russia are reduced.

Wheat prices would increase by 8.7% under the moderate scenario and 21.5% under a severe shock, the report says. Corn prices would rise by 8.2% to 19.5%.

Ukraine is also a major producer of sunflowers, and a reduction in supplies of sunflower oil would have a ripple effect on the prices of other vegetable oils, the report says.

Price increases also could extend to livestock and poultry. “A cut in feed wheat and maize (corn) availabilities would similarly bolster prices of feed products. Combined, these factors would drive livestock prices up, with the more feed-intensive poultry and pork sectors directly affected the most,” the report said.

FAO said fertilizer prices would likely increase another 13% because of the impact the war is having on the prices of crude oil and crops.

The war also could worsen hunger. The report estimates the number of undernourished people globally would increase by 7.6 million people to 13.1 million people, depending on whether the supply shock is moderate or severe.

FAO last week reported that its index of global food prices hit an all-time high in February, eclipsing a record set in 2011.

FAO’s assessment of the war’s impact notes that Ukraine and Russia “are among the most important producers of agricultural commodities in the world,” accounting for 19% of the barley, 14% of the wheat and 4% of the corn produced globally between the 2016-17 and 2020-21 crop years.

The report cautioned other countries about imposing measures to protect their food supplies.

“Before enacting any measures to secure food supply, governments must consider their potential effects on international markets. Reductions in import tariffs or the use of export restrictions could help to resolve individual country food security challenges in the short term, but they would drive up prices on global markets,” the report said.

Click HERE to read more about the report from the Food and Agriculture Organization of the United Nations.