Russia’s Torching of Wheat Fields in Ukraine May Not Disrupt Global Supplies as Much as Putin Hopes

Videos of burning Ukrainian wheat fields set alight by Russian forces are making the rounds on social media. As reprehensible as they appear, they may not be inflicting the market disruption and food insecurity that Moscow desires.

Reports of intentional torching of Ukrainian wheat fields by Russian forces or partisans have been in the press for well over a month. Though Kyiv claims the fires have been purposely triggered by Russian incendiary shells and other weapons, such claims have of intent have not been independently confirmed. Nevertheless, recent photos and videos do show Ukrainian wheat going up in flames.

As these images circulate, U.S. Secretary of State Anthony Blinken estimated that 20 million tons of Ukranian grain is sitting in locked silos outside Black Sea port Odesa. More is waiting on ships blocked from leaving Ukraine’s key strategic port. On Sunday Blinken said, “President Putin is stopping food from being shipped and aggressively using his propaganda machine to deflect or distort responsibility, because he hopes it’ll get the world to give in to him and end the sanctions… In other words, quite simply put, it’s blackmail.”

Global production of wheat, rice and other grains is forecast to reach 2.78 billion tons in 2022, 16 million tons less than in 2021 and the first decline in four years according to the U.N. Food and Agriculture Organization (FAO). Wheat prices have increased 45% in the first three months of 2022 compared with the previous year, according to the FAO’s wheat price index.

However, food prices were going up prior to the invasion thanks to a rebound in demand from the lows of the Covid-19 pandemic. Supplies were also down from poor 2021 wheat harvests in the United States and Canada as well as drought in Brazil and the Horn of Africa. In March, a heatwave in India reduced wheat yields. Rising fuel prices (which also pre-date Russia’s invasion) have increased production and shipping costs and lengthened delivery schedules.

There is evidence that Russia has tried to benefit from the theft of Ukrainian wheat which may conflict with the notion (but in no way excuse Russian actions) that it is seeking to burn large swathes of the crop. Satellite images taken in late May by Maxar TechnologiesMAXR
show Russian-flagged ships in a port in Crimea being loaded with grain and then days later docked in Syria with their hatches open.

Russia’s naval control of the Black Sea – and it’s on again, off again hold on Snake Island – has thwarted Ukrainian wheat exports. According to Joseph Glauber, a senior research fellow at the International Food Policy Research Institute in Washington, Ukraine has only been able to export 1.5 million to 2 million tons of grain a month since the beginning of the war, down from more than 6 million tons a month previously.

Ukraine and Russia account for nearly one-third of the world’s wheat and barley exports, a position they achieved over the last two decades while wheat exports from Argentina, Australia, Canada and the U.S. remained relatively static in absolute terms, dropping as a percentage of the world market.

The two Black Sea exporters gained global market share by investing billions of dollars in production equipment and inputs, roads, storage facilities, rail and truck transportation systems, and export facilities. They also leveraged a transportation advantage conferred by their Black Sea/Mediterranean geography.

Ocean transportation for wheat from Black Sea ports to North African ports was about 41 cents per bushel, compared to about 82 cents from U.S. or Canadian ports and about 95 cents from Australia in 2019. At that time the North African countries of Egypt (No. 1 importer), Algeria (No. 3 importer), Libya, Morocco, and Tunisia imported 16 percent of the world’s wheat exports, presenting a lucrative market for Ukrainian/Russian wheat.

Russia likewise enjoys a shipping advantage to Middle Eastern countries, a number of which including Israel, Saudi Arabia and Iran have avoided criticism of Russia’s invasion or lent their support.

Despite all of the above, the most recent data from the Chicago futures market indicate that Russia may not be benefitting as much as the media/social media attention would have us believe. As of Monday, Chicago wheat futures fell to below $8.5 per bushel, retreating from the one-week high of $8.8 touched earlier in the session and back to levels from before Russia’s invasion of Ukraine, pressured by strong supplies.

Ironically, Russia recently cut its wheat export taxes, as a record amount of wheat may become available for shipping due to a stronger harvest there. As it does so, U.S. planting data is pointing to increased grain acreage and higher-than-expected stock levels, as North American farms are ahead of schedule in their harvesting season.

Some Ukrainian grain is being rerouted through Europe by rail, road and river, but it’s a small quantity compared with sea routes. The shipments also are backed up because Ukraine’s rail gauges don’t match those of its neighbors to the west. Ukraine’s deputy agriculture minister, Markian Dmytrasevych, has also asked the European Union for help exporting more grain. That could include expanding the use of a Romanian port on the Black Sea, building more cargo terminals on the Danube River or cutting red tape for freight crossing at the Polish border.

Ukrainian wheat exports could restart if the country removes mines in the Black Sea and agrees that arriving ships can be checked for weapons by Russian authorities Russian Foreign Minister Sergey Lavrov is reported as saying. According to the Associated Press, Turkish Foreign Minister Mevlut Cavusoglu said last month that it may be possible to create secure corridors without the need to clear sea mines because the location of the explosive devices are known.

The blockade goes on as does the apparent burning of Ukrainian wheat. But if this year’s Russian and Western harvests prove to be bountiful, Putin’s leverage using food supplies may not be as strong as he’s hoped and the global backlash will surely be stronger.