Download Potential Impact of the Russia-Ukraine Crisis on Agriculture in

Potential Impact of the
Russia-Ukraine Crisis
on Agriculture in the Americas
Technical Note -June 2014
Victor M. Villalobos A., Director General,
Inter-American Institute for Cooperation on Agriculture
A
sharpening of the political crisis between the Ukraine and Russia could
have an impact on agriculture in the Americas and on the world’s basic
grain trade. This analysis, prepared for the Ministers of Agriculture of
the Americas and the Offices of the Inter-American Institute for Cooperation on
Agriculture (IICA), aims to serve as support for the design of strategies to cope
with a possible downfall in food availability that could result from increased
tension among those two nations.
Information from the Black Sea region is complex and highly variable. All
estimates to date suggest that, should political tensions worsen in that region,
exports would fall, which would drive up international food prices.
Given that region’s importance to the world’s supply of wheat and corn,
IICA, through its Center for Strategic Analysis for Agriculture, considers
it pertinent to report on possible impacts in the American hemisphere of a
sharpening of the crisis between the Ukraine and Russia.
Russia and Ukraine are two of the world’s
largest producers and exporters of agricultural
products; in 2012, they were among the world’s
ten main grain exporters. In the case of wheat,
Russia is the fifth largest exporter in the world,
while Ukraine is the seventh. In the case of
corn, Ukraine is the fourth largest exporter
and Russia is the ninth. Together, these two
countries furnish nearly 13% and 14% of
world corn and wheat exports, respectively.
Therefore, any situation that affects their
productive or marketing capacity will have an
impact on international agricultural markets.
Since the outset of the Russia-Ukraine
conflict, trading on the grains futures markets,
particularly corn and wheat, has displayed a
certain degree of nervousness. From January
to April 2014, wheat and corn prices rose by
18% and 12%, respectively. For wheat, it was
the highest price increase since mid-2012,
confirming that, should the conflict worsen, the
prices of these commodities will increase even
further.
Nonetheless, the international price
hikes seen to date seem to be temporary and
Table 1. The Americas: Contribution of wheat and corn to the national diet
Contribution
to national diet
High
(20% to 40%)
Corn
Wheat
Guatemala
Mexico
Honduras
El Salvador
Nicaragua
Paraguay
36,10%
32,49%
27,43%
26,57%
25,35%
20,21%
Uruguay
Chile
Saint Lucia
Argentina
Trinidad and Tobago
Dutch Antilles
Jamaica
31,73%
29,23%
25,83%
23,24%
23,19%
21,95%
21,20%
Venezuela
Bolivia
Colombia
Haiti
14,23%
13,90%
12,26%
11,22%
Antigua and Barbuda
Bermuda
Dominica
Canada
Saint Vincent
Bolivia
Belize
Guyana
Saint Kitts
United States
Barbados
Surinam
Granada
Peru
Ecuador
Bahamas
Venezuela
Brazil
Haiti
Panama
Honduras
Costa Rica
Cuba
Guatemala
19,55%
19,40%
19,07%
18,80%
18,70%
18,69%
18,32%
17,77%
16,97%
16,43%
16,39%
16,21%
15,31%
13,46%
13,01%
12,36%
12,31%
12,10%
12,03%
11,59%
11,25%
10,98%
10,90%
10,87%
Belize
Cuba
Chile
Peru
Brazil
Uruguay
Panama
Barbados
Canada
Costa Rica
Trinidad and Tobago
Saint Vincent
Argentina
United States
Dominican Republic
Bahamas
Ecuador
Granada
Dominica
Jamaica
Guyana
Antigua and Barbuda
Saint Lucia
Surinam
Dutch Antilles
Saint Kitts
Bermuda
9,37%
8,01%
7,26%
7,18%
6,59%
6,30%
6,22%
3,87%
3,44%
3,15%
3,02%
2,88%
2,78%
2,58%
2,45%
1,82%
1,63%
1,63%
1,59%
1,53%
1,10%
1,01%
0,96%
0,47%
0,19%
0,12%
0,00%
El Salvador
Paraguay
Colombia
Dominican Republic
Nicaragua
Mexico
9,63%
8,58%
8,24%
7,91%
7,83%
7,44%
Medium
(10% to 20%)
Low
(to 10%)
Source: Prepared by author (CAESPA) with FAOSTAT data
lower than what could be expected given the
importance of that region. The low impact of
the political stress on international markets
can be attributed primarily to the fact that,
despite the conflict, the Ukraine’s thirteen ports
and the five Crimean ports on the Black Sea,
from which the vast majority of the region’s
grain is exported to world markets, seem to
be operating without significant setbacks.
Moreover, harvest forecasts for the Ukraine,
Russia, and other wheat- and corn-producing
countries, especially the United States, are
favorable, mitigating market nervousness.
In the case of the Americas, a shortfall in
basic grain supplies in the international market
or an increase in grain prices will have varying
impacts, depending on: i) the duration of the
conflict and the duration of possible changes in
grain prices; ii) each country’s grain inventory;
iii) each country’s productive and commercial
structure: countries that are net exporters of
grains (mainly wheat and corn) could benefit
from an increase in international prices, while
countries that import large amounts of grains
will experience greater financial and supply
pressures in order to satisfy domestic needs;
and iv) the contribution of wheat and corn to
each country’s diet.
Figure 1 shows a summary of the share of
imports in domestic wheat and corn supplies,
while Table 1 shows the contribution of wheat
and corn to the diets of the inhabitants of the
countries of the hemisphere.
In light of this situation, IICA recommends
that its member countries keep a close eye
on market signals and review their wheat and
corn import-export strategies. If they are net
importers of these grains, they should ensure
that fluctuations do not weaken their food
security; if they are exporters, they should
take advantage of the opportunity to position
their harvests in international markets with
better prices.
Given the importance of the Black Sea
region to the world’s grain trade and the
potential impact of an aggravation of the crisis
in that region on food availability and prices,
IICA will continue to monitor this topic and
report on it to its member countries.