Disruptions to the worldwide flow of grain and oilseed commodities, fertilizers and energy supplies resulting from the Russian siege of Ukraine may continue to contribute to an increase in food, fuel and fiber prices for a long time to come.
This was the concurrence of Collin Waters, who is the director of exports and logistics for the Illinois Corn Marketing Board, and Stan Born, a central Illinois farmer who serves on the nine-member American Farm Bureau Federation executive committee. Both men traveled to the Peoria County Farm Bureau auditorium on March 24 to talk, among other topics, about how life for farmers and consumers could be impacted by the Russia-Ukraine conflict, which is now in its second month.
“Ukraine exports a lot of corn, particularly into European markets, the Middle East and North Africa. They are the fourth-largest (corn) exporter for the last few years,” said Waters. “What’s going on right now is adding a lot of volatility to the market.”
Virtually none of the corn grown by Ukrainian farmers reaches the U.S., according to Waters. That doesn’t mean that “lost” plantings of corn, wheat, sunflowers and other crops caused by Ukrainian farmers fleeing their war-torn regions won’t affect American consumers, however.
“My impression is that most (Ukraine) farmers are going to want to plant. They’re going to do their best to get a crop in the ground, and to get it out. But there are a whole lot of problems right now in them getting the inputs they need,” Waters said. “Fuel, in particular, is going to be a problem, as will fertilizers and seed. Some projections are that maybe half of their cropland will get planted this year.”
Without needed fertilizers, fungicides and herbicides, there is no guarantee that planted crops mature to harvest. Currently, all movements of fertilizers and commodities within and out of Ukraine have been halted. And with millions of Ukrainians fleeing their homes to seek refuge in friendly nations to the west, a greatly reduced workforce could result in planted crops going unharvested in the fall.
“The Ukrainian government has asked all able-bodied men to stay and fight, and the farmers to do their best to plant a crop. But certainly labor is going to be a concern, and not just on farms-- the entire logistic chain will be impacted,” Waters said.
The disruption to shipments of fertilizers used by farmers may bear an even bigger impact on prices than a food and feed chain shutdown in Ukraine, which is a top international wheat exporter.
“The U.S. has imported fertilizers from Russia, Ukraine and Belarus; they are major fertilizer suppliers to the world. Any sort of supply problem in one area will ultimately have an impact elsewhere,” according to Waters, adding that many of the same countries that import Ukraine’s crops also purchase the majority of their fertilizers-- primarily anhydrous ammonia.
“There will be competition from other countries that need it, so it will put some upward pressure on prices and availability. That issue might have a longer tail going into the future. Going into next year (2023), this is going to be a big question mark.”
How does all of this serve to directly impact the prices U.S. consumers pay for groceries, fuel and fibers? It shouldn’t-- for a little while, at least.
“We’re still for the most part working off last year’s crop in terms of the commodities we use to make food. We’ll see a year or two from now how all this plays out, but yeah-- I think there is an inflationary tendency to all of this, and that is a concern,” said Waters. “For farmers high prices are good, but not in the long run. I think there is a lot of concern for what this could mean for demand, longer-term. We might be seeing demand destruction.”
Born, a former Dunlap resident and Caterpillar employee who now farms near Decatur, agreed that competition for fertilizers will continue to push farm input and food prices north.
“When it comes to food we will see prices go up in some areas more than others. Egypt and North Africa, where they consume a lot of bread, are big importers of Ukraine’s wheat. I think you’ll see it hit them harder than it will us here.”
“They're going to have to get (wheat) supplies from somewhere, and maybe some of that will come from us. That will drive prices up for wheat, and drive up prices at the grocery stores for you and me. The effects will be felt around the world but to different extents,” Born said.
Poorer, developing countries will likely take the brunt of the suffering that will be associated with food supply disruptions and shortages, Born predicted. “They won’t have the resources to be able to buy from these other sources, as they have to compete for these inputs. It’s going to be more acute and intense for the poorer nations than it will be to rich nations like the E.U. and the U.S.,” he said.
According to the United States Department of Agriculture, Ukraine accounts for 12 percent of total world wheat exports and is estimated to supply 16 percent of the world’s corn exports. Together, Ukraine and Russia supply nearly a third of the world’s wheat and barley exports.
In the weeks following the Russian invasion of Ukraine, already-high wheat prices were boosted to 37 percent above 2021 marketing year levels. Corn prices have risen another 21 percent this year, after growing by 20 percent in 2021.
The commodity increases have already prompted companies like General Mills and Kellogg to raise product prices and pass the costs on to consumers, the Associated Press reported last week.
