Business

Grain market can be hit hard by Russian invasion of Ukraine

Russia and Ukraine account for 30% of global grain exports

A Russian invasion of Ukraine would have the biggest impact on the world grain market, according to Eren Gunhan Ulusoy, head of the International Association of Operative Millers (IAOM) Eurasia.

“Because the total wheat export of the two countries constitutes 30% of the world grain exports, if the tension escalates, it will have negative effects on both supply and prices on grain markets,” he told Anadolu Agency.

He underlined that currently, there is no grain shortage.

While in the recent period, Russia was accused of a possible invasion of Ukraine by the western countries, Moscow has denied any plan related to the invading instead of thousands of troops at the Ukrainian border.

On Monday, Russian President Vladimir Putin signed a decree recognizing the so-called rule of pro-Russian separatists in eastern Ukraine.

While the US strongly condemned this decision of Russia, the UN Security Council stated that the point reached between Ukraine and Russia is extremely dangerous.

After the recent developments, commodity prices, especially wheat, oil and gold, increased. The wheat price increased to over $271 per ton in the US future index, from around $264 on Friday.

Previously, Semsi Bayraktar, the head of Turkiye’s Union of Agriculture Chambers (TZOB), also warned against price increases in the grain sector related to the Russia-Ukraine tension.

He stressed that there should be no uncultivated land left in Turkiye, and there is “no choice but to increase production to avoid food inflation.”

2022 grain expectations

While last year there was a decline in grain production due to pandemic measures and drought, an increase of 3.2% is expected for the 2021-2022 season, Ulusoy said.

The global grain consumption is also forecasted to increase by 2.6% in this season, he added.

Meanwhile, the grain production is expected to narrow by 2.1% in major grain exporter countries such as Argentina, Australia, Canada, Europe, Kazakhstan, Russia,and the US, Ulusoy stressed.

Touching on the Green Deal measures, he said that the deal is expected to reduce productivity in agriculture due to the limits of some inputs in industrial agriculture.

“Therefore, together with the Green Deal, policies that will replace the loss of production should be planned,” he added.

While the price of wheat per ton was around $200 in May 2021, it exceeded the $300 level in November 2021 due to the production loss, Russia’s taxation and increasing demand, especially due to the stockpiling.

In 2021, Russia began to implement a 70% tax for the difference between a base price of wheat — $200 per ton — and the market benchmark price.

Turkiye’s position

While Turkiye is a self-sufficient country in the grain sector, during the last two years, the production failed to meet the consumption, Ulusoy said.

In 2021, the wheat import’s share was 36% of the total wheat production, he noted.

The wheat production was 4.7 million tons in the first half of the 2020-2021 season, while it increased by 7% in quantity and 40% on a value basis in the same period this season, he underlined.

Despite the increase in rain in autumn and December, harvest expectations for the 2021-2022 season still remain unpredictable, he said.

“However, according to the preliminary data, it can be stated that a better yield than last year, but slightly lower than the general averages, is expected,” he added.

He noted that prices would maintain their high course due to the low production and input costs.

Mentioning the country’s leading position in the flour export market globally, he said the country’s protected its position in the market last year.

Source
AA

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