How the war redirected Ukraine's grain exports

Russia's invasion of Ukraine in 2022 and the temporary blockade of its Black Sea ports have redirected the flow of grain from the "breadbasket of the world".

One of the world's leading producers of wheat, corn and vegetable oils, Ukraine shipped much of its grain internationally before the war, with seven of the top ten destination markets for Ukrainian grain exports in 2021 being in Asia and North Africa (eight if Turkey is included), according to Statista, which cites UN Comtrade data.

When the war abruptly halted the flow of Ukrainian grain, commodity prices rose to unprecedented levels amid fears of a global food shortage.

After five months of war, the United Nations brokered an agreement between Ukraine, Russia and Turkey that allowed Ukrainian grain exports to resume via the Black Sea route. The Black Sea Grain Initiative went into effect on 22 July 2022, and Ukraine's grain exports quickly returned to pre-invasion levels. Even after the agreement ended in July 2023, when Russia refused to renew it, Ukraine and its partners found alternative ways (and routes) to keep the grain flowing, the source noted. In addition to exporting grain overland through neighboring countries, Ukraine continued to export grain via an alternative route to the Black Sea. By remaining close to the border of the friendly states of Bulgaria and Romania, the potential for Russian disruption was successfully minimized.

According to data from the UN Comtrade database, a large share of Ukraine's grain exports went to Europe last year, with Romania, Poland and Hungary seeing particularly large increases in grain inflows from their conflicted neighbour. Meanwhile, Indonesia, Iran, Pakistan, Morocco and Tunisia all dropped out of the top 10 as the war forced them to find alternative suppliers of this vital food product, the source said.

• The Kremlin has expanded its control over Russian grain

The Russian state is expanding its control over an ever-larger part of the grain industry, which could give it greater power over exports, just as worries about global supplies are intensifying, reports Bloomberg, according to Agerpres.

A number of major Western grain traders, including Cargill and Viterra, pulled out of Russia last year after the Moscow government pressured the country to make room for local firms. Now even Russia's most important private grain trader is having difficulty operating due to disputes with the state. That puts the market in the hands of a few companies, some of which have ties to the Kremlin.

The consolidation of Russia's grain sector has accelerated since the invasion of Ukraine, and makes just four firms responsible for three-quarters of grain exports through Russian Black Sea terminals, giving Moscow even more influence over wheat supplies, which are crucial for mitigating world inflation in the food products segment. It also makes it more difficult for foreign traders to get information on the state of Russian supplies, at a time when adverse weather developments are affecting Russia's wheat harvest and spooking the market.

"Russia's desire to control the market of raw materials is real, and its influence on grains is growing," says Dan Basse, president of the American consulting firm AgResource.

Russia's natural gas industry has always been dominated by the government, while the Russian state and Putin's closest allies have controlled most of the oil industry since he came to power. Now, the Russian state is expanding its control over grain as well.

Last year Cargill, Viterra and Louis Dreyfus Co. they stopped buying grain from Russia for export. Previously, these Western companies were among the top ten exporters from Russia. However, now the dispute between the state authorities and TD Rif highlights the fact that private grain exporters from Russia are also beginning to be subjected to pressure from the government. The firm, which recently changed its name to Rodnie Polya LLC, helped position Russia as a major global agricultural power and now finds its business in jeopardy.

The company's owner, Petr Khodykin, told the Lenta.ru news portal in March that the company's grain deliveries had been blocked by the agricultural regulator on the grounds that they did not meet safety standards, adding that he was under pressure to sell his company.

Several people who used to buy grain from Rodnie Polya's foreign partners say that the company is no longer present on the market since March. The shipping data provided by the OS Logistic company shows that the volume of exports made by Rodnie Polya in April was lower by approximately 40% compared to April last year.

Even though Western traders can still buy grain from Russian ports, obtaining information on the volume and conditions of grain harvests, stocks and exports has become more difficult after these firms curtailed their business in Russia. That could become a source of concern as various issues leave Russia with less wheat to export.

Issues such as the impact of drought or frost on grain crops have caused analysts to significantly revise their estimates of Russian production, and that has helped wheat futures climb sharply.

Even though benchmark wheat prices have risen in recent months, they are still about 50% below the record high reached in 2022, when the war in Ukraine disrupted supplies via the Black Sea.