Agricultural impact of Russia-Ukraine conflict
By: Sydney Sheffield
The Russian invasion of Ukraine is expected to have a rippling effect throughout the United States and the rest of the world. Experts warn the U.S. agriculture system could suffer because of the conflict, with disruption of trade flows, greater inflationary pressures, and an increase in volatility across a wide range of global markets.
While Russia and Ukraine do not represent major destinations for U.S. commodities, ranking 56th, and 80th, respectively, the conflict’s impact on global trade, trade alliances, and infrastructure could swell throughout U.S. sectors in the near- and long-term future.
Fertilizer, on the other hand, is something experts say will be largely impacted. Russia is a big player in the fertilizer market. Russia is the world's top exporter of natural gas, which is used to make nitrogen fertilizer, and a top producer of potash, a key component of many fertilizers. Together, Russia and Belarus make up more than 40% of the global potash market.
“That region of the world [Russia and Ukraine] is a pretty significant producer of key fertilizers or key components to fertilizer, so that is definitely on the minds of farmers,” said Garrett Hawkins, the Missouri Farm Bureau president. United States Department of Agriculture, Agriculture Secretary Tom Vilsack said, “I sincerely hope that no company out there — whether it’s fertilizer or any other supply that may be impacted by this — will take unfair advantage of the circumstances of this situation, making sure that they don’t use this situation as an excuse for doing something which isn’t necessarily justified by supply and demand.”
Mark Welch, AgriLife Extension small grains economist, said the futures grain markets, from wheat to grains for livestock feed, will likely be affected most by the invasion. Ukraine and Russia together are expected to account for about 30% of global wheat exports in the current marketing year. Experts at the University of Illinois believe the invasion is likely to impact the spring planting season for Ukrainian farmers, the magnitude of which will depend on the length and severity of the conflict. Diversion in trade flows will lead to price pressures and increased volatility for the agricultural commodities for which Russia and Ukraine play relatively large roles in terms of global production and trade.
While experts suspect there will be little direct impact on the U.S. protein markets, the conflict could impact some trade sectors indirectly, including protein production. According to a CME Group’s Daily Livestock Report following the invasion, the impact of restrictions on Russian protein purchases in the world market is likely to have no impact on the global trade of those items. However, the market disruptions stemming from the conflict and Russian sanctions will also result in higher agricultural commodity prices, which will hurt net agricultural importers, particularly in developing parts of the world.
