1.

1 Russia and Ukraine in agriculture industry

Russia and Ukraine in food industry

Russia is among the countries investing large amounts of capital in the food

industry, which has made the food market become one of the most crucial and profitable

markets in Russia. In 2020, the market reached a new revenue record of 268,11 billion

USD.

Cereals and legumes were the most exported agricultural commodities from

Russia, which, despite the reduction in exports during 2015 and 2016, increased to over

10 billion USD by the end of 2018. According to Rosstat, from 7/2017 to 6/2018, the

total output of cereals and legumes was 135,4 million tonnes, more than 85,9 million of

which was wheat. Moreover, in only 8 months (7/2017 to 2/2018), Russia exported more

than 33,548 million tonnes of cereals and legumes, 39,7% higher than previous year. 

Russia has a large consumer market all over the world. The top 10 importers of

Russian agricultural products include South Korea, Kazakhstan, Egypt, Belarus, Ukraine,

Uzbekistan and Azerbaijan.

Ukraine has 41.5 million hectares of agricultural land covering 70 % of the

country and about 25 % of the world’s reserves of black soil, which makes Ukraine’s

agriculture industry become the most promising sector of the economy.

Agriculture is Ukraine’s largest export industry which accounted for about 9,3%

of Ukraine GDP in 2020. From 2013 to 2017, Ukraine harvested over 60 million tonnes
of grain and legumes annually. In the next 2 year, the output increased to 70 and 74

million tonnes respectively. In the 2020 harvest season, the amount of harvested grain

slightly decreased to 65,4 million tonnes, which was three times higher than the domestic

needs.

The food industry exports products such as cheese, dairy, sweets and alcoholic

beverages (beer, wine and vodka) to Europe.

With its advantages in agricultural production, Ukraine has become Europe's

breadbasket for centuries. Ukraine is a top exporter of corn, barley, and rye, especially

the country’s wheat that has the biggest impact on food security around the world. In

2020, Ukraine exported about 18 million tonnes of wheat, making it the world’s fifth-

largest exporter. China and the European Union have become an essential importer of this

commodities of Ukraine. Moreover, in 2021, China imported a record of 8,2 million

tonnes of corn from Ukraine, accounting for 30% of total corn imports. 

Furthermore, Ukraine’s main importer of wheat are Egypt, Indonesia, Turkey and

Pakistan. In 2021, the export amount of wheat of Ukraine to these countries were 3

million, 3 million, 1,7 million and 1,3 million tonnes respectively. Lastly, its fast-growing

agricultural exports—grains, vegetable oils, and a host of other products—are crucial to

feeding populations from Africa to Asia.

 Ukraine and Russia are top exporters of major grains and vegetable oils, according

to the International Trade Center in 2020. The two countries are the main exporter of

Sunflower seed or cottonseed oil. Moreover, as Russia is the world’s largest wheat

exporter, Ukraine and Russia were responsible for over 26 percent of global wheat

exports in 2020.
 It is undeniable that Ukraine and Russia are important food suppliers to many

countries in the world. If the prices are further rising due to the conflict, and more

increases as the war continues could cause greater food instability and hunger — not only

in Ukraine, but around the world.

Although many countries have proceeded to find an alternative solution, food

insecurity may happen anywhere that a government can’t afford enough food for its

population.

Furthermore, the higher food prices can also contribute to conflict even in the

areas of the world that are not directly affected by the original event.

Russia in fertilizer industry

Fertilizer industry is one of the most important industries in the Russian economy

since 19090. Russia is among the top production of fertilizer in the world nowaday.

In 2019, Russia exported a total of 8,85B billion USD in fertilizers, and ranked 1

among all exporters of fertilizers in the world. In the same year, fertilizers were the 7th

most exported product in Russia. 

By the end of 2021, Russia showed a positive trade balance in the fertilizer

industry of 1,76 billion USD. In the same year, Russia exported more than 1,78 billion

USD of fertilizer, which was 1,28 billion USD (254%) higher than the previous year. On
the other hand, the total import value of fertilizer also experienced an upward trend with

an increase over 9,54 billion USD (208%) to 14,1 million USD in the same period. 

In 2021, Brazil was the largest importer from Russia. In this period, Brazil

imported fertilizer with a total value of mostly 587 million USD, followed by the United

States with 223 million USD and India with 128 million USD. Moreover, Finland and

China also accounted for a large number in the export of fertilizer from Russia with 142

million USD combined. On the other hand, Russia only imported fertilizer in small

amounts. Some of the partners of Russia were: Belarus (8,45 million), Kazakhstan (2,21

million), Belgium (796 thousand), Netherlands (451 thousand), and Lithuania (437

thousand).

In 2020, according to Natural Resources Canada, Russia was the second largest

producer of potash with over 13.800 thousand tonnes, accounting for 20% of total world

production. Moreover, Russia exported more than 10.000 thousand tonnes of potash

(nearly 19%) in 2020. 

As Russia is among the major partners in this market, sanctions on Russia will

have a severe effect on markets. Moreover, if Russia withdraws its willingness to trade,

such major partners of Russia like Brazil, USA, China will be badly affected. Small

countries like Belarus, Lithuania, Kazakhstan will experience further crises.

Table 1 - Russian fertilizer exports and market share in 2021

Russian fertilizer exports and market share in 2021

Product Tonnage Export market share Export market rank

 MOP 11,832,717 27% 3rd
Ammonium 4,313,229 49% 1st
nitrate
Urea 6,999,814 18% 1st
NPKs 5,928,142 38% 1st
Ammonia 4,424,342 30% 1st
DAP/MAP 4,048,081 14% 4th
Sulphur 1,805,567 9% 3rd

Ukraine produces wheat, barley and rye that much of Europe relies on. It’s also a

big producer of corn. It can also be seen that Russia is also the world’s top wheat

exporter. Together with Ukraine, both account for roughly 29% of the global wheat

export market.

Figure Error! No text of specified style in document.- 1 - Grain exports per country in 2021

Grain exports per country in 2021

(Million tonnes)
46

95 180
63
40
Rest of the world Ukraine Russia
US EU

Source: Trade map

Consequences
 Increasing production cost for food

Fertilizer is an important product for making many agricultural products like

wheat and corn these are one of the most important trading products in the market

because it contributes largely to the food source of countries.

Figure Error! No text of specified style in document.- 2 - Wheat prices in the US

Source: Trading economics

Figure Error! No text of specified style in document.- 3 - Corn prices in the US

 Source: Trading economics

Due to its relatively larger usage of fertilizers, the maize market is projected to be

the most affected by the increase in fertilizer costs. Some farmers may be able to shift

their planting acreages away from corn and toward more profitable crops that use less

fertilizer, or they may be able to lower the quantity of fertilizer they use in corn

cultivation. This would likely reduce output and support grain prices even further.

The rising price of gas and fertilizer, as well as droughts and adverse weather in

some regions had already helped to push up the global price of wheat and other

commodities.
 Wheat and corn prices were already soaring. Wheat futures traded in Chicago have

jumped about 12% since the start of this year, while corn futures spiked 14.5% in the

same period.

Inflation effects

The increase in prices of food also cause inflation in the market in the long run.

Since food place a great importance in the CPI so any fluctuation in prices of food can

cause the CPI to change drastically.

In the case of the conflict, Inflation is expected to increase due to the increase in

prices.

Table 2 - CPI relative importance in 2021

Expenditure Relative importance

category 2021
All items 100
Food 13.37
Energy 7.348
Commodities less
food and energy 21.699
commodities
Shelter 32.946
Medical care
6.962
services
Transportation
5.599
services
Source: US Bureau of labor statistic

The increase in inflation can harshly affect the market since the natural inflation

rate is already high and increasing so there must be action to calm down the market

before the inflation rate gets out of control.

 Figure Error! No text of specified style in document.- 4 - US inflation rate from 2021 to 2022

Reference

https://www.agriculture.com/news/business/vilsack-fertilizer-prices-are-biggest-

worry-for-farmers-after-russian-invasion

https://www.bloomberg.com/news/articles/2022-02-24/nitrogen-fertilizer-prices-

spike-after-russian-attack-on-ukraine

https://www.cnbc.com/2022/02/23/impact-of-russia-ukraine-on-supply-chains-

food-metals-commodities.html

https://www.ifpri.org/blog/how-will-russias-invasion-ukraine-affect-global-food-

security

https://www.ft.com/content/a6227910-751b-443c-883f-2ed41a828426