War to Cut Ukraine, Russia Grain Exports Significantly

Russia’s war in Ukraine will significantly cut both countries’ grain exports, already lowered in USDA and other forecasts. Ukraine’s spring-planted corn and sunflower seeds will be the first farm casualty of the war. Retired Economic Research Service official William Liefert.

“A preliminary assessment by the Food and Agricultural Organization is that because of all the difficulties, 20 to 30-percent of area for Ukraine winter wheat, corn, and sunflower seed for the 2022-23 season will either go unplanted or unharvested and that yields will also be negatively affected.”

War damage to Ukraine’s infrastructure and Russia’s possible control of its ports will further limit Ukraine’s exports. Western sanctions are aimed at cutting Russia off from trade, but Liefert says Moscow could curtail grain exports on its own.

“Russia has often restricted grain exports when grain prices rose substantially in order to mitigate food price inflation, especially for bread, and also help the domestic livestock sector. And the Russian government is currently considering such export controls again.”

And Liefert says Russia might use grain as a political weapon. “But, if Russia controls Ukraine or its Black Sea ports, might it consider banning Ukraine’s corn exports to western Europe.”

Either way, Russia has a money problem. “Could the exclusion of Russian banks from the SWIFT Network for international bank transactions impeded payment (for) Russian exports by foreign grain purchasers? However, since both Russia and western countries might want Russia to export its grain if that trade is initially hurt in this way, the western countries might want to exempt from the SWIFT sanctions the banks that handle Russia’s grain trade.”

USDA has already lowered its estimate of Russian wheat exports for 2021-2022 from 35 million tons to 32 million, and Liefert says could lower it further in new forecasts.

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