Supply chain disruptions still of concern despite improved expectations for global wheat supply

As of late June, Russia continues to concentrate ground military operations in eastern parts of Ukraine after withdrawing troops from northern areas in April. As of June 25, Russian forces had fully occupied the Luhansk city of Severodonetsk. However, Russian missile strikes continue to impact civilians across Ukraine, with 48 cruise missiles reportedly striking areas in the western, northern, and southern regions in an attack in June. As of June 24, four months since the start of the invasion, UN OCHA estimates that 4,662 civilians have been killed and another 5,803 have been injured. As of late June, UNCHR reported that over 7 million people remain internally displaced within Ukraine and over 5 million refugees from Ukraine remain present across Europe. Access constraints continue to limit the movement of people and humanitarians, particularly in the eastern areas where thousands are trapped without sufficient access to clean water, electricity, or fuel.

On June 17, the Ukrainian Ministry of Agrarian Policy and Food reported that the spring planting season had concluded. Despite earlier concerns due to active conflict and challenges procuring agricultural inputs—especially fuel—planted area for most main crops is expected to be similar to last year, with the exception of corn. A total 4.6 million hectares of corn was reportedly planted this year, 16 percent less than last year but only 7 percent less than the five-year average according to USDA data. The Ministry of Agrarian Policy and Food also announced on June 17 that the harvest had started in southern parts of Ukraine, beginning with barley. The harvest of winter wheat will likely start in early July, with the harvest of spring crops to come later in the fall.

With declining concern for crop production levels, the greater concern for the economy and livelihoods in Ukraine is the reduction in Ukraine’s export capacity due to the continued closure of the Black Sea Ports alongside limited remaining storage capacity in unoccupied parts of the country. According to Ukraine’s Deputy Minister of Agrarian Policy and Food, Ukraine had 75 million tons of grain storage before the war, but this has since been reduced to 60 million tons of storage due to damage and occupation by Russian forces. According to the Ukrainian Agribusiness Club, the country is expected to have sufficient storage for crops that are harvested in the summer, including wheat and barley. However, localized variations are likely, and some farmers are already expanding use of silo bags due to lack of storage, risking reduced incomes due to post-harvest losses and quality reductions. Ukraine’s agriculture minister warns that an additional 10-15 million tons of storage capacity may be needed by the fall.

Global wheat prices declined in June to reach levels close to those recorded prior to the Russian invasion of Ukraine, driven at least in part by expectations for record production in Russia. According to USDA analysis published in mid-June, despite reductions in Ukrainian exports, global wheat trade is expected to increase by 4 percent relative to last year due mainly to increased exportable supplies from Russia and Canada. Despite this, countries previously dependent on imports from Ukraine are now seeking to shift to alternative suppliers amidst tight global supplies. These supply chain shifts and elevated global prices are resulting in higher importation costs, and some countries are struggling to procure needed volumes of staple goods, including wheat, as stocks decline. Concern for the national food supply is high for countries like Somalia and Yemen, which import the majority of their staple wheat requirements. Procurement of commodities for humanitarian assistance programming is also being challenged by disrupted supply chains and higher costs, with cuts now manifesting in countries with high assistance needs, including Yemen and South Sudan.

On June 30, Russian troops withdrew from Snake Island. Control of the island is strategic due to its location along a key shipping lane in the Black Sea. The Ukrainian President has stated that the reclamation of Snake Island by Ukrainian forces would significantly limit Russia’s actions in the Black Sea but does not yet guarantee security. It remains to be seen whether this development will lead to further progress in establishing security of shipping routes. Additionally, talks between Russia and Ukraine over unblocking Ukrainian grain exports have progressed slowly, with Russia pointing to the need to remove mines in the Black Sea and with Ukraine expressing concern that doing so would enable Russian forces to attack Odessa. As such, exports by sea are not expected to improve in the near term.