My colleague Jason Hartschuh, Ohio State University Extension Educator in Crawford County, wrote an article in this column describing the dairy industry in Ukraine. This article will describe the crop sector of the agricultural industry in Ukraine, impacts on grain movement, and potential impacts to U.S. agriculture, because of the invasion.
Agriculture in Ukraine
According to the World Data Center, agriculture has been evolving since the end of the Soviet Union. The climate in Ukraine is similar to that in Kansas, with approximately 42 million acres classified as agricultural land. For comparison, there are 13.5 million crop acres in Ohio.
Ukraine is well-suited to grain crop production, with the primary crops being wheat, barley, rye, sugar beets and sunflowers. The livestock industry has concentrated considerably in Ukraine since the collapse of the Soviet Union because of declining subsidies and increased production costs.
Impact on grain movement
While Ukraine and Russia do not represent large export markets for U.S. agricultural commodities, the situation causes additional uncertainty to agriculture in the United States.
According to agricultural economists at Texas A&M University Extension, Russian imports of U.S. agricultural products have fallen to between $200 million and $300 million annually. The economists note that the invasion will impact global trade, trade alliances, and infrastructure in the short and long term. Mark Welch, Texas A&M Extension agricultural economist, reported that Russia and Ukraine are expected to account for about 30% of wheat exports this marketing year. Jason Grant, professor and Director for the Center for Agricultural Trade at Virginia Tech, reported that Russia and Ukraine account for 13-15 % of global wheat production. Grant also noted that, because agricultural commodity markets are determined globally, the conflict will increase both inflationary and food security pressures.
Harwood Schaffer and Darrel Ray, Agricultural Policy Analysis Center at the University of Tennessee, note that the share of global wheat exports from Russia and Ukraine have increased significantly, from 6.2% in 2010 to 27.6% in the 2020 marketing year. The global share of U.S. exports over the same period dropped from 26.4% to 13.3%.
In the 2010 crop-marketing year, Russia and Ukraine accounted for 5.5 percent of global corn exports–virtually all these exports came from Ukraine. By the 2020 crop year the two accounted for 15.4% of global corn exports. In the 2010 marketing year, the U.S. was responsible for 50.8% of global corn exports, but the share fell to 38.7% by 2020.
Impacts to U.S. agriculture
We are experiencing higher fuel prices at the pump, grain markets rallied on news of the invasion and resulting sanctions and the invasion created further uncertainty for fertilizer costs. What does the future hold for fuel, fertilizer and grain prices?
It’s impossible to say with certainty, but the market does not like uncertainty. In other words, expect a great deal of continued volatility. Schaffer and Ray make the following points about possible impacts:
Russia may try to broker a deal with China to avoid trade sanctions. If this happens, the U.S. may be able to capture markets previously served by Russia.
If the war continues, who will harvest the Ukraine wheat crop and how will it be transported?
If the consensus is that the wheat crop will be short, expect an increase in prices.
If commodity prices do increase, will it be enough to cover rising fuel and fertilizer costs?
There was a great deal of uncertainty in U.S. agricultural markets before Russia’s invasion of Ukraine, and the war does nothing but further complicate an already chaotic situation. Much will change with time. I encourage you to examine how this war impacts your business and pray for the citizens of Ukraine.
