How Russia’s invasion of Ukraine is affecting global agricultural markets

Abstract

The war in Ukraine has roiled commodity markets and raised concerns about global food security. Ongoing fallout from the COVID-19 pandemic and other factors had already driven up food prices before Russia’s invasion.1 Poor harvests in South America, strong global demand, and supply-chain issues reduced grain and oilseed inventories, driving prices to their highest levels since 2011–13.2 Vegetable oil prices have also been at record levels, reflecting a short South American soybean crop, reduced palm oil supplies due to harvest problems in Malaysia, and sharply increased use of palm and soybean oil for biodiesel production. Prices of key energy-intensive inputs such as fuel, fertilizer, and pesticides have also been at near-record levels.
Russia’s invasion of Ukraine will further disrupt global markets, hurt global grain supplies in the short term, and, by disrupting natural gas and fertilizer markets, negatively affect producers as they enter a new planting season. This could further increase already high food prices and have serious consequences for low-income net food–importing countries, many of which have seen an increase in malnourishment rates3 over the past few years in the face of pandemic disruptions.