Russia-Ukraine: Impact of escalating tensions on global grains and fertilizer markets

What's at stake for food and agriculture commodities?

In recent years, Russia and Ukraine have become emerging agricultural powerhouses. Today, they account for nearly 30% of world wheat exports, 30% of world trade of barley exports and the command a 15% market share of vegetable oils. To say these two countries have become an integral part of global agricultural and food commodities trade is no overstatement.

Any disruption in the short run is a matter of whether world trade will be impacted. More than 90% of all Ukrainian food and ag commodity exports pass through sothuern Ukraine, and any seizing or fighting around these ports has the potential to be tremendously disruptive.

On the Russian side, the risk to world trade is not from military incursion but from economic sanctions. In in response to military action, Russia is locked out of the SWIFT banking system, the electronic "plumbing" that facilitates nearly all international wire transfers, Russia could still export but would be unable to receive payment. Presumably, exports will grind to a halt in this essential origin if this occurs.

Risks to the world of fertilizers

Russia is a significant global supplier of fertilizer. If sanctions are imposed, fertilizer exports are likely to be severely impacted as financial sanctions limit the ability of Russian companies to trade in US dollars.

Global fertilizer prices are currently at their highest levels since the 2008 commodity bubble and subsequent financial crash. Any sanctions on Russian fertilizers will ensure the supply balance across most products remains tight for longer than would otherwise be the case, implying that fertilizer prices remain at elevated levels for longer.

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Posted 02 February 2022 by Allan Pickett, Head of Analysis, Fertilizers, S&P Global Commodity Insights and

Mr. Hughes Paul, Executive Director, Research and Analysis