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Factbox: Russia’s Ukraine invasion seen disrupting vegetable oil, grain trade flows

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Factbox: Russia’s Ukraine invasion seen disrupting vegetable oil, grain trade flows

Highlights

Both nations major suppliers of grains, vegetable oil

Key ports shut, vessels movement blocked

Supply disruption could further fan food inflation

  • Author
  • Aditya Kondalamahanty    Shikha Singh    Sampad Nandy
  • Editor
  • Aastha Agnihotri
  • Commodity
  • Agriculture
  • Tags
  • United States
  • Topic
  • Food Security War in Ukraine

Russia's invasion of Ukraine sent agricultural commodities spiraling Feb. 24 following monthslong tensions in the Black Sea region that kept prices of key grains such as wheat highly volatile.

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As both Russia and Ukraine command clout in global trade flows of grain and vegetable oil, rising uncertainty in the region around port closures and blockages on vessel navigation are expected to keep prices of commodities such as sunflower oil, corn and wheat elevated in the near term.

While commercial movement in the Azov Sea stands closed, markets await clarity whether the invasion is only restricted to the two contentious provinces as navigation in the Black Sea still remains open.

Any disruption to trade flows could potentially affect food security and prices, at a time when food inflation has soared to a record high in the last one year.

Sunflower oil

Trade flows

**Sunflower oil shipments from Ukraine and Russia were halted following the news of bombings in Ukraine, with buyers finding it difficult to track their orders, trade sources told S&P Global Platts Feb. 24.

**Some Indian buyers with stuck cargoes were looking to book alternative shipments to meet their requirements.

**Ukraine exported 5.27 million mt of sunflower oil in 2020-21, accounting for 46.9% of the global exports, while Russia's share in the global trade stood at 29.9%, trade data showed.

**Sunflower oil is the world's third-most traded vegetable oil after palm and soybean oil.

Infrastructure

**Ukraine is the world's largest producer of sunflower oil followed by Russia. The two countries accounted for 60% of the global production in 2020-21.

**Ukraine produced 5.9 million mt of sunflower oil in 2020-21, while Russia's production reached 5.1 million mt.

Prices

**Sunflower oil FOB Black Sea Ukraine has risen 12% since Jan. 1 to $,1480/mt Feb. 23. Soybean oil rose 21% since the start of the year to $1,582.48/mt, while crude palm oil FOB Indonesia rose 13% to $1,600/mt, Platts data showed.

Graph: Black sea wheat prices drop while corn prices rise amid invasion

**Third-month palm oil futures jumped over 7% on the day to MR 6,411/mt ($1,531/mt) on Malaysia's commodity exchange Feb. 24, beating its own record high set on Feb. 23, as buyers seek alternatives to sunflower oil.

**May soybean oil futures on the Chicago Board of Trade rose to 74 cents/lb, up 5.7% from the previous close. Soybean oil futures crossed the 70 cents/lb mark for the first time in nine years Feb. 22.

Wheat

Trade flow

**Ukraine and Russia are key exporters of wheat, with both accounting for a combined 23% of global wheat trade in 2021-22 marketing year, according to the US Department of Agriculture.

**Ukraine has seen a 27% rise in its wheat shipments so far in the marketing year 2021-22 (July to June), with exports rising to 16.1 million mt, as neighboring Russia increased its export taxes. Platts Analytics projected Ukraine's wheat exports at 22.5 million mt in MY 2021-22.

**Russia, the world's largest wheat exporter, has seen a weak wheat export campaign in MY 2021-22 (July-June). Between June 1 and Feb. 17, Russia had shipped 25.2 million mt, 24% lower over the year. Platts Analytics has estimated Russian MY 2021-22 wheat exports at 36.5 million mt.

Infrastructure

**Ukraine has harvested around 33 million mt of wheat in MY 2021-22, up from 25.4 million mt in MY 2020-21, according to the ministry.

**Platts Analytics projected Ukraine's wheat production at 31.2 million mt for MY 2021-22, while the USDA pegged Ukraine's wheat output for the year at 33 million mt.

**Russia's wheat harvest was at 79.1 million mt in MY 2021-22, a 10% drop from a year ago, according to the agricultural ministry. Russia's wheat output is expected to fall in MY 2021-22, due to adverse weather conditions. Platts Analytics projected Russia's wheat crop at 77.6 million mt in MY 2021-22.

Prices

**Black Sea wheat prices witnessed sharp volatility in the last few weeks, with futures prices rallying Feb. 24 after Russia's invasion.

**Ukraine's wheat export prices have fallen in the last few weeks, declining 3.4% on the month to $309/mt Feb. 23, according to Platts data.

**Russia's wheat export prices have also remained weak, falling 5.2% on the month to $313/mt Feb. 23, Platts data showed.

Corn

Trade flow

**As of Feb. 14, Ukraine has exported 17.37 million mt of corn in the MY 2021-22, around 36.8% higher than the corresponding period last year, according to Ukraine's agriculture ministry data.

**In the ongoing MY 2021-22, Ukraine is likely to export 33 million mt of corn, sharply above the previous year's corn exports of about 23 million mt, S&P Global Platts Analytics said.

**Though uncertainty remains over how the situation is going to evolve in Ukraine, and any possible curb on exports from the country could send corn buyers to the US.

** China and the EU are leading buyers of Ukrainian corn.

Infrastructure

**Ukraine is one of the world's largest corn exporters, representing 16% of 2021-22 marketing year's total global corn exports and concerns are emerging that shipments from the country could be disrupted by the invasion impacting global corn supplies.

**The USDA sees Ukraine's corn production in MY 2021-22 at 42 million mt, sharply up 30% from the previous year.

Prices

**Futures prices of corn on key global exchanges have rallied to multi-month highs following Russia's invasion of Ukraine.

**The most-active May futures contract on the Chicago Board of Trade gained 35 cents/bushel following the news of invasion, to hit an eight-month high of $7.16/bushel at 0929 GMT.

**Ukraine corn export prices have also strengthened after the tensions escalated on Ukrainian borders. The Ukrainian corn FOB Black Sea was assessed at $289/mt on Feb. 23, up roughly 6% from early January, according to Platts data.