Global energy and agricultural commodity prices decline further in December

The national economy of Ukraine has somewhat recovered and stabilized since the conflict began, in large part due to the more than 31 billion USD in assistance contributed by international partners (mainly the US, EU, and IMF). Still, the national economy reportedly contracted by around 30 percent in 2022 overall, according to a preliminary estimate by Ukraine’s Ministry of Economy. Additionally, high domestic inflation continues to constrain poor households’ ability to afford all essential food and non-food needs. According to data from the State Statistics Service of Ukraine as reported by Trading Economics, the national year-on-year food inflation rate stood at around 35 percent as of November 2022. According to a horticulture analytics project, demand for greenhouse vegetables has declined notably, likely at least partially due to  rising prices. Although the Ministry of Economy projects a GDP growth rate of one percent in 2023, significant uncertainty exists.

Ukraine’s monthly and annual food commodity exports remain well below normal. In December 2022, Ukraine exported 4.1 million tons of cereals and legumes by all means of transportation, according to data from the State Customs Service of Ukraine as of December 28. This volume is 24 percent less than the amount exported in December 2021. For the 2022/23 marketing year (July 2022 to June 2023), Ukraine exported 22 million tons of cereals and legumes as of December 28, which is 30 percent lower than the same period of the prior marketing year. The pace of exports by sea, specifically, continues to be slowed by delays in inspections required as part of the Safe Grain Corridor Deal, which Ukraine accuses Russia of deliberately causing. As of mid-December, 92 vessels were waiting to be inspected, according to Ukrainian state media.

FAO’s global food price index declined slightly (by 1.9 percent) in December for the ninth consecutive month, reaching levels similar to the same time last year. This decline was driven mainly by a 6.7 percent decline in the vegetable oil price sub-index. However, the average value of the food price index throughout 2022 was 14.3 percent higher than the 2021 average and well above 2020 and 2019. In December, the cereal price sub-index also declined slightly (by 1.9 percent) but prices remain 6.8 percent higher than the same time last year. In addition to supply and demand factors, a decline in global energy prices in December exerted some downward pressure on food prices.

As of the end of December, the Ukrainian government and WFP continue to plan the implementation of the Grain from Ukraine initiative announced in late November, which uses donor funding to both purchase Ukrainian grain and fund its shipment to food-insecure countries. As of late December, three ships carrying 80,000 tons of wheat had departed for Somalia and Ethiopia as part of the initiative. WFP intends to purchase an additional 75,000 tons of agricultural commodities for Ethiopia and Yemen.