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Ukraine conflict could push grain prices higher worldwide

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A wheat field outside the village of Karpenkovo, Russia.

A wheat field in Russia, which supplies a large share of global wheat exports. Agricultural markets could be disrupted by war, along with commerce in energy. Kirill Kudryavtsev/AFP via Getty Images

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Oil and natural gas aren’t the only exports that could be disrupted by what’s happening in Ukraine. The region is also a major producer of agricultural products. Russia and Ukraine, taken together, supply more than one-quarter of the world’s wheat exports, almost 20% of corn exports and 80% of sunflower oil exports.

The situation on the ground rattled commodity markets Monday, with corn for delivery next month up nearly 3% and wheat nearly 6%.

Grains are a foundation of human and livestock diets. “It’s a very important staple food around the world, so even a relatively small disruption in supplies can have a large effect on prices,” said Patrick Westhoff, director of the Food and Agricultural Policy Research Institute at the University of Missouri.

In the short term, the sanctions Western nations impose on Russia could result in a lot of already harvested grain staying in Russia, and military actions could disrupt trade routes on the Black Sea. In the long term, a wider invasion of Ukraine could do a lot of damage to that country’s agriculture sector, according to Per Hong, a partner at the Kearney consulting firm.

“It really could mean sharp declines in wheat production, a real fall in wheat exports as farmers flee the fighting, infrastructure and equipment are destroyed,” he said.

The conflict could be good news for other wheat-exporting countries, said Steve Nicholson at Rabobank — including the U.S., the second-biggest exporter.

Trouble is, the North American wheat crop has been hampered by drought. “And so you add this on top of this already food inflation, it just exacerbates the problem,” Nicholson said.

Rising grain prices could spur instability in countries that rely most heavily on imports from Russia and Ukraine, including Egypt, Turkey and many countries in North Africa, per Ghada Ahmed, founder of Insurgent Business Analytics.

“Grains, in general — you know, the loaf of bread, its availability, its price — are a critical part of food security,” she said.

Ahmed added that rising food prices a decade ago could have played a part in fomenting the Arab Spring.

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