Ukrainian grain exports continue to be constrained. Ukraine’s upcoming summer crop could be its smallest harvest in twelve years. 

Prior to Russia’s invasion of Ukraine in early 2022, Ukraine regularly annually exported over 60mmt of grain including wheat, accounting for 10% of the global market. Ukrainian grain flowed into many markets, including South East Asia, a key destination also for Australian grain. But the war damaged the grain export infrastructure of Ukraine, especially its easterly ports.

Shortly after the outbreak of war, spiking global food prices led Russia and Ukraine to agree to a July 2022 ‘grain deal’, brokered by the United Nations and Turkey (which controls the Bosporus Strait, through which most Black Sea grain passes). The deal, which existed for just over a year, returned grain exports to near prewar levels (Figure 1).   

Before the war approximately 90% of Ukraine’s grain left through its Black Sea ports. After May 2022, the European Union provided westward access for Ukrainian grain. But this angered grain farmers in these bordering countries as their local prices for grain became depressed. Hungary and Poland at times threatened to block access to their roads, so European Union policymakers provided these countries with over USD150 million in compensation. 

To strengthen its ability to export grain from its remaining ports, Ukraine targeted Russian navy vessels in Sevastopol, Crimea, forcing these ships to relocate to ports further east, thereby lessening their threat to Ukrainian grain shipments and new more secure coastal routes enabled more grain shipments from Ukraine (Figure 2). 

Nonetheless Russia’s destruction of Ukrainian farmland and equipment—and its ongoing occupation of one-fifth of Ukraine (Figure 2) and on-going targeting of Ukrainian ports restricts Ukrainian grain exports. It also adds to the cost of Ukraine’s export supply chains and production costs. The war has contaminated an estimated 2.8 million hectares of Ukrainian farmland, and analysts are forecasting Ukraine’s upcoming summer crop to be its smallest harvest in twelve years.  

Key takeaway: An unintended consequence of the conflict is that Australian grain exports, especially into South East Asia, are less exposed to price-competitive Black Sea grain.