In the next two years, the European Commission estimates a 30% increase in exports of cereals to mitigate the impact on global markets of the reduced Ukrainian yield due to the war.
Russia’s invasion of Ukraine has put the spotlight again on food security, as both countries involved in the war have a central role in supplying the world with staple grains and oils.
Together, the two agricultural powerhouses provide more than a third of the world’s wheat and barley, 52% maise, and over 50% sunflower oil and seeds.
The latest short-term trade outlook report drafted by the European Commission and published on Tuesday (5 April) acknowledged that the invasion “significantly disturbed agricultural markets, creating more uncertainty regarding the future global availability of grains and oilseeds.”
However, it adds that the European harvest for both grains and oilseed is likely to be “very good”, according to new data projections released by the Commission.
Apart from the forecasted increase in arable crops harvest, a lower feed demand following the crisis in the pigmeat sector will contribute to the expected production bonanza.
Despite some encouraging price trends, pigmeat production will be affected by the lasting effects of African Swine Fever (ASF) and high energy and feed costs, keeping producer margins under pressure.
Therefore, demand for animal feed is expected to decrease by 1.1% in 2022-23 and cereals’ use for biofuels production, which will fall by 8% in the same two-year period.
The combined effect of these two factors is projected to enable EU grains export to be 30% higher compared to the five-year average, with an additional 42% decrease in EU grain imports.
“This would contribute to cushion the impact on world markets of the expected lack of grain exports from Ukraine,” the outlook highlights.
The report also recognises uncertainties in the capacity of Ukrainian farmers to sow, fertilise and harvest their production this year. Transport and logistical disruption caused by the fighting will also impact Ukraine’s ability to expert the current and future production.
One outlook scenario also entails no exports from Ukraine in 2022-23 featuring 20 million tonnes of wheat missing on the global market.
Cereals prices in the EU market, which already surged in the past weeks, are expected to remain particularly high this year and in 2023, as farmers have already sown and the 2022 production area is projected to increase by 1%.
However, the latest measures adopted by the EU, particularly the recent decision to exceptionally allow the production on fallow land, are expected to increase output by increasing usable land for growing grains combined with the positive effect on the production of high prices for crops like corn.
Some areas of concern due to extreme weather conditions are limited to Southern regions of Europe and North Africa, which have already impacted winter crops.
While the EU is mainly self-sufficient for most agricultural commodities, the outlook says that there is no real possibility to replace imports of sunflower oil from Ukraine, with food processors already expressing concerns.
Ukraine accounted for more than a third of the global sunflower oil trade in 2021. However, sunflower seed stocks were at comfortable levels last year, benefitting from bumper harvests in Europe and significant increases in China, Turkey, and Kazakhstan.
Imports of sunflower products are expected to drastically reduce by 45% as imports from Ukraine came to a halt after the start of the war. Prices will also maintain all-time highs, including substitutes like rapeseed and other oilseeds.
For the Commission, this could nevertheless create opportunities for other products, such as olive oil for cooking, as production increased by 10% in 2021-22.
[Edited by Alice Taylor]