The increasing threat of Russian aggression intoUkraine, Europe’s breadbasket, will deleteriously impact the global food.Subsequently this supply and price shock could trigger socio-politicalinstability not only in emerging countries but also well-established democraticeconomies.

After Russia’s incursion, beyond energy - natural/liquifiedgas, crude oil and coal - as I articulated in my SA article published 16January 2022 Energy and Gold Prices toSoar After Likely Russian Invasion, food prices, specifically corn, wheat, barley andrye, will rise dramatically like their energy counterparts.

With the spring planting season approaching, regardlesswhether Russia decides on occupying a sliver of Ukrainian territory, notablythe pro-Russian Donbas region, or larger swaths beyond Donbas, the issue willbe whether Ukrainian agribusiness will be able to plant, harvest and sell theirproducts.

Ukrainian Agricultural Overview

According to the International TradeAdministration, agriculture is 9.3% of Ukraine’s GDP. Ukraine’sagricultural yields have been consistently good since 2013 harvesting at least60 million tons of grains. The 2022 forecast projects a considerable increase. Theaverage annual yield is three times Ukraine’s domestic needs making them one ofthe world’s largest agricultural exporters.

The following data are particulars for each cropprovided by the World Data Center forGeoinformatics and Sustainable Development:

·       With a climate similar to Kansas, Ukraine the main grain output encompasseswheat, corn, barley and rye.

·       4^th largest exporter of corn (eastern and southern Ukraine),planted in April/May, harvested in September, and barley (eastern Ukraine),planted in April and harvested in August.

·       6^th largest exporter of wheat (south and south-centralUkraine). It’s a winter wheat planted in fall and harvested the followingsummer.

·       7^th largest exporter of soybeans.

·       World’s leading sunflower seed oil exporter (southern and easternregions), planted in April harvested in September. It’s their most profitablecrop because of low production costs and high demand.

·       Most exports are shipped to Spain and Italy,North Africa, the Middle East and East Asia (China, Japan, Korea).

Ukraine’s agribusiness’ biggest essential importedexpenses are for seeds, pesticides, fuel, farm machinery and equipment.Agricultural yields correlate closely to the farmers’ ability to securefinancial aid and credit for the aforementioned needs.

Russia | Weaponizing Food

For many years the Russians have had a strangleholdof energy exports to the heavily-dependent EU. Their newest ‘weapon’ could beUkraine’s food exports. This vulnerability is outlined in the followingoverview of Ukraine’s agriculture:

·       It is estimated that pro-Russian separatists now occupying theDonbas region and the Russian government’s annexation of Crimea has reduced totalUkrainian agricultural production by 10%.

·       In late December 2018 Russia placed an embargo on Ukrainian agriculturalimports for political reasons. Although Russia’s own agricultural yields have beenrobust, they have reduced their agricultural exports in order to maintainaffordable prices for their citizens. If they leverage their occupation in Ukrainethey can reduce those domestic prices further.

Global Food Supply & Prices

For the aforementioned reasons, there is greatuncertainty after a Russian invasion and occupation regardless howterritorially limited, as to what extent Ukraine will be permitted to continueagricultural operations and whether exports will be limited or restricted.

The world was adversely impacted in 2021 byinflationary prices for pesticides, fertilizers and severe meteorologicalevents that impacted crop yields and exacerbated by supply chain disruptions.

Furthermore a Russian invasion and occupation will furthersqueeze an already tightening food market since many governments have, officiallyand unofficially, limited or even banned outright export of domestic agriculturalproducts. This has been done for the purposes of food security and maintaining affordablefood prices to avoid socio-political instability.

The food export restriction policy of even smallcountries impacts global food prices as illustrated on the following linkcalled the exponential domino effect in which a seemingly smalland insignificant factor becomes a powerful multiplier effect that triggers anoutsized crisis far beyond its domestic borders.

Domestic Unrest

Russia’s control of Ukrainian agricultural production and exports will pushup global agricultural prices and “goose” the present-day inflationary foodprices. It could represent a tipping point that could trigger social unrest inthe US as many families are unable to afford food and Food Banks are unable tomeet the unrelenting demand.

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The Cerulean Council is a NYC-based think-tank that provides prescient,beyond-the-horizon, contrarian perspectives and risk assessments ongeopolitical dynamics and global urban security.