The Russia-Ukraine war has focused global attention on the key economic roles that those countries play as major exporters of agricultural commodities. Over 2019-2021, they accounted for 12% of global agricultural trade on a kilocalorie basis, with a combined market share of 34% for wheat, 26% for barley, 17% for maize, and 75% for sunflower oil. The war has scrambled this picture, with Ukraine’s exports falling dramatically, and Russia’s falling, then recovering.
While the Black Sea region has historically been a major grain producer, its emergence as a major world exporting region is a relatively recent phenomenon. From the 1970s until the early 2000s—the decades immediately before and after the collapse of the Soviet Union—Russia and Ukraine were net grain importers. This post examines how and why Russia and Ukraine became such important factors in 21st century global food markets—and thus why the war poses a continuing threat to global food security.
Soviet economic distortions and collapse in the 1990s transition
By the early 1970s, the Soviet Union had become a large net importer of wheat (Figure 1a) and maize (Figure 1b). This was the direct result of Soviet economic policies; specifically, production shifted away from grains after the government instituted a policy to stimulate meat and dairy production and consumption via large subsidies through massively distorted prices.
Figure 1a
Figure 1b
Grain imports continued in the years following the formal dissolution of the Soviet Union in 1991, but now for different reasons. After 1991, Russia’s agricultural sector, like the overall economy, collapsed. The region’s abrupt transition from a planned to a market economy during the 1990s resulted in a severe decline in agricultural gross output. Dairy, livestock, and grain production all fell. Land reforms in Ukraine and Russia were introduced slowly as part of the economic transition. As collective farms were broken up, many small operations struggled, unable to take full advantage of scale efficiencies offered by mechanization and other technologies. Full private ownership of land with transfer rights evolved gradually; in Ukraine, a major land reform was introduced in 2002, but the moratorium on land sales transactions was only lifted in 2021. At the same, capital constraints restricted fertilizer use and disruptions in supply chains made grain trade costly.
As a result of these problems, cereal area in Russia fell by over 25% in the 1990s, from almost 60 million hectares in 1992 to 43 million in 2001 (Figure 2). In addition, grain yields in Russia and Ukraine declined strongly in the 1990s as fertilizer use fell by about two thirds. As a result, both Ukraine and Russia continued to be net importers of cereals.
Figure 2
Productivity growth since 2000
Agricultural production in Russia and Ukraine began to turn around after 2000. By then, improvements in property rights and farm restructuring efforts in the 1990s began yielding increasing productivity. Around the same time, the Russian and Ukrainian economies recovered from the late 1990s financial crisis and investments increased in the agricultural sector.
Wheat yields for Russia and Ukraine rose steadily—by 1.4% and 1.8% annually, respectively—between 2002/02 and 2021/22. Maize yields showed even larger growth. Ukraine maize yields have risen by 4.4% annually over the last 20 years while Russian maize yields have risen by 5.5% per year (Figure 3).
Figure 3
Nevertheless, many problems remain. Cereal production in Russia and Ukraine has shown a relatively high degree of variability during the last two decades , and research suggests that yields of these crops in Ukraine and Russia have not reached their maximum potential. The relatively high vulnerability of crop yields to adverse weather conditions and the relatively low yields compared to EU levels are also related to limited access to credit and finance, and uncertainties in the regulatory framework of the agricultural sector, which create a barrier for input use (such as fertilizer and plant protection) and general investments.
Growth of exports and new markets
As production rebounded in the 2000s (Figure 2), grain exports increased dramatically and accelerated in the past decade. From 2012/13 to 2021/22, annual wheat exports increased by 10.0% annually in Russia and 11.3% in Ukraine, while the rest of the world’s wheat exports increased by only 2.3% per year. Over the same 10-year period, Russia and Ukraine maize exports increased by 7.6% and 6.5% per year, respectively.
What are the principal market destinations for Russian and Ukrainian crops? Given the proximity of the Black Sea, countries in North Africa and Western Asia have been the primary destinations for wheat exports (Figure 4). Those countries combined accounted for about half of Russian and Ukraine wheat exports over the period 2019-2021.
Figure 4
Yet market destinations have also changed and evolved with expanding production. Wheat exports to the rest of Asia have risen over the past 20 years and accounted for 13% of Russian wheat exports over the period 2019-2021. Countries such as Indonesia, the Philippines, and more recently Pakistan have become important buyers of Ukrainian wheat. Overall, Asian markets account for almost 40% of its wheat exports (2019-2021). African countries south of the Sahara are a small but growing market, accounting for almost 13% of Russia’s exports and 8% of Ukraine’s exports 2019-2021.
The market composition for Russia and Ukraine maize is less similar than that of wheat exports (Figure 5). In recent years, both countries have shipped about almost one third of their maize to Asian markets such as China. The remainder of Russia’s maize exports go to markets in North Africa and Western Asia (largely Middle Eastern countries like Syria and Türkiye). North Africa and Western Asia are important markets for Ukraine as well (accounting for almost 30% of its exports over 2019 to 2021). The remainder of Ukraine’s maize exports go largely to Europe (about 40%) whose feed manufacturers have a preference for non-GMO maize. Neither Russia nor Ukraine are significant exporters of maize to African countries south of the Sahara.
Figure 5
Increasing reliance on Black Sea grains
The expanding production and exports of Russian and Ukrainian agricultural exports over the past two decades has made them important players in global markets. This increased many countries’ reliance on the region to meet key import needs (Figure 6)—and made their populations more vulnerable to the war’s disruptions. For example, Ukraine and Russia accounted for 50% of Egypt's wheat imports in 2013; by 2021, they accounted for over 76% of its imports. Indonesia imported 8% of its wheat needs from the two countries in 2013 and almost 27% in 2021. Ukraine accounts for over 55% of the EU's maize imports compared to less than 5% prior to the mid 2000s. China has become a large importer of maize as well, and Ukraine has been an important supplier, accounting for over 40% of China's maize imports over the past three years. At the height of its trade war with the United States, China imported over 80% of its maize needs from Ukraine.
Figure 6
The Russian invasion of Ukraine has sharply disrupted trade flows out of the Black Sea, as exports out of Ukraine ports were blocked, forcing traders in grains and other agricultural products to seek alternative (and more costly) export routes. While evidence suggests that Russian grain exports have largely recovered, Ukraine monthly export volumes continue to be well below levels of a year ago. This has caused many importing countries such as Egypt and Bangladesh to seek alternative suppliers.
Conclusions
The grain agreement between Ukraine and Russia has brought some hope that agricultural exports from the Black Sea will return to more normal levels and that trade with the region will continue to grow. However, with the conflict ongoing, the agreement is at best tenuous. Production prospects in Ukraine for 2023 remain pessimistic, as producers continue to face high costs of fuel and other inputs, combined with low output costs due to several factors, including a lack of sufficient storage and, despite the opening of trade corridors, high shipping costs that reduce local prices. The war’s impacts on Russia’s agricultural sector include sanctions imposed by Western countries that have raised input costs. How quickly the region rebounds—and when global market shifts and food security impacts settle down—will depend much on how quickly the conflict comes to an end.
Joseph Glauber is a Senior Research Fellow with IFPRI's Markets, Trade, and Institutions Division; David Laborde is Director, FAO Agrifood Economics Division and a former IFPRI Senior Research Fellow; Johan Swinnen is Managing Director, Systems Transformation, CGIAR, and Director General, IFPRI. Opinions are the authors'.
