From The Green European Journal, January 9:
In the 1990s, Ukraine again became one of the world’s leading grain exporters after decades of Soviet agricultural mismanagement. It retains this status despite the major disruptions to the European grain market caused by the war.
Ukraine has always been one of the largest suppliers of grain to global markets. At the beginning of the twentieth century its share in the global export of wheat stood at 20 per cent, barley at 43 per cent, and grain in general at 21 per cent. No wonder that it earned the nickname of the “breadbasket of Europe”: grain crops have always been the main exports of Ukrainian agriculture.
For a long time, the USSR (like the Russian empire) was a net exporter of grain, mostly from the Ukrainian SSR. Not only was this policy responsible for the Holodomor, the state-engineered famine in 1932 and 1933 that killed millions in Ukraine, but it also caused the post-war famine of 1946–1947 and the early 1950s. Then, in 1961, a landmark event took place: for the first time ever, the USSR began buying grain from abroad, mainly from the US, turning it into a net importer. In the Ukrainian SSR, the poor management of collective farms had led to a decrease in yield. Out of 504 collective farms in the Kyiv region, only 25 paid people a salary in cash rather than in natural products.
Between 1963 (when statistics began) and 1990, grain imports grew 10 times – from 3 million to 32 million tons, still primarily from the US. The shortage of supply meant that there was a propagandistic cult around bread in the late USSR. Those who lived through this period as a child recall that the only correct answer to the question “What’s the price of bread?” was “Bread is priceless”. Children learnt this maxim in schools, and it was impossible to complete the initialisation procedure to join the Pioneers without answering this question.
In 1990 Ukraine officially harvested 51 million tons of grain, a figure that grew to 92.6 million tons by 2020, and a record 106 million tons in 2021, the year preceding the war. Ukrainian exports in 2021 were 51.2 million tons. Throughout the 2010s, Ukraine was one of the world’s top five exporters of grain, alongside the EU, Australia, Argentina and Russia. Ukrainian grain was deeply integrated into the global market with a share of over 10 per cent, capable of both influencing market prices and being susceptible in turn to price fluctuations.
Ukraine maintained this position as it entered the 2020s: its pre-war share in global wheat exports was 10 per cent (fifth highest worldwide), in sunflower seed exports 42 per cent (highest), corn 16 per cent (second highest), and in barley 10 per cent (third highest).
How has the war affected the grain market?
Until the full-scale invasion, the Ukrainian agrarian export was oriented towards Asian countries and above all China, with shipments to the latter reaching 30 per cent of total agricultural exports (6.3 million tons) – a colossal figure, given the huge monetary and commodity volumes of Ukrainian agricultural trade. Some analysts interpreted Chinese purchasing activity in the 2021 season as Beijing taking steps to shield itself from the effects of a war in Europe, which would inevitably cause an increase in food prices. Sure enough, on 24 February 2022, China was sitting on record reserves of agricultural produce.On the first day of Russia’s full-scale invasion of Ukraine, rising oil prices and risks of reduced corn supplies from Ukraine and Russia, the world’s biggest exporters of grain, led to an increase in stock prices for grain of up to almost 6 per cent, although prices for Black Sea grain increased substantially less, by between 1 per cent and 2 per cent. Russian bombardments and attacks on Ukrainian port infrastructure also had a clear impact on grain prices on the world exchange. Some of the largest price surges on the NYMEX (New York Mercantile Exchange) in the last five months directly coincided with particularly destructive Russian attacks.
During the night of 6 June 2023, for example, Russian troops blew up the dam of the Kakhovka hydroelectric station on the Dnieper River in the Kherson region. After that, grain prices rose by almost 100 cents in less than two weeks (from 627 cents per bushel – a unit of measurement equal to 27.2155 kg). According to satellite images, over 7,000 hectares of land on the left bank of the Dnieper were flooded after the catastrophe (though the Ukrainian Ministry of Agriculture cites 25,000 hectares). On the right bank, 100,000 tons of crops were destroyed. In the neighbouring Mykolaiv region, more than 1,000 agricultural holdings were covered by water, with commercial losses totalling over $500,000.
On 17 July, prices again leapt upwards when Russia declared that it was abandoning the grain deal – the agreement under which Russia was obliged to provide a grain corridor for cargo ships. That night, occupying Russian troops attacked the Odesa region with missiles and drones, damaging port infrastructure. Prices rose from 654 cents per bushel to 725 cents in just two days. Russia again struck the ports of Odesa and Mykolaiv by night, damaging grain silos. Between 17 and 19 July, 60,000 tons of grain were destroyed by Russian attacks.
EU steps up imports of Ukrainian grain
In the wake of the full-scale Russian invasion, Ukraine began exporting large volumes of goods, including grain, overland. In 2022, for the first time in more than 10 years, Asia lost its position as the biggest importer of Ukrainian agricultural produce. While Ukraine was the top exporter to countries in the region in 2022, with a turnover of $7.3 billion, it has now slipped to third place, behind Europe and Turkey.
In 2022, the volume of supplies of Ukrainian agricultural products to EU member countries increased by 66 per cent year-on-year. The share of domestic exports of agricultural products to the EU exceeded half of all Ukrainian agricultural exports for the first time, amounting to 55.5 per cent. For comparison, 27.7 per cent of agricultural exports from Ukraine went to the EU in 2021.
As a result, five countries bordering Ukraine – Bulgaria, Hungary, Poland, Romania and Slovakia – ended up with a grain surplus and, consequently, a collapse in prices for their own goods. Polish agricultural media reported that from January to August 2022, grain exports from Ukraine to Poland increased by 180 per cent compared to the same period in 2021. In the first half of 2022, the average price of consumer wheat in Poland ranged from 1,600 to 1,800 zloty (€353–€397) per ton; in March 2023 it dropped to 1,000, and in May it fell to 900. Meanwhile, cheap Ukrainian grain continued to flow into the country. Polish farmers were unenthusiastic about the expected losses and protests broke out....
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