Soy harvest

A growing number of countries have imposed curbs on exports of farm commodities due to “uncertainty” about “future supplies”, according to the US Department of Agriculture – which listed Russia’s invasion of Ukraine as the latest in a number of “converging factors” to throw global food supply chains into flux.

The department’s Foreign Agricultural Service this week said 11 countries had banned exports of goods - including wheat, barley, rye, corn, various oilseeds, lentils and beans - causing a “further tightening of supplies” and “additional upward pressure on prices” after a year-and-a-half of surging costs and supply chain disruptions. 

Russia, which banned exports of many agricultural goods a month ago in response to western economic sanctions, had before its late-February invasion put limits on overseas sales of fertiliser and its ingredients – of which it is the world’s biggest supplier – in turn prompting major European fertiliser manufacturers to announce production cuts.

Among the other countries banning exports in recent weeks were Belarus, Hungary, Serbia, Turkey, North Macedonia and Egypt, with others, such as commodities-exporting powerhouses Argentina and Indonesia, restricting overseas sales of their soy oil and palm oil, and still others proposing diverting farmers into domestic-focused grains production as concerns grow about the cost and reliability of global supply chains.

“Farmers and producers in countries with export bans and restrictions may not be able to respond with increased production due to limited access to the global market and disrupted price signals, thus exacerbating supply shortfalls,” the department warned.

The curbs had what the department said inflicted a “large impact on the vegetable oil and meal market”, after the near-elimination of supply of sunflower oil from Russia and Ukraine, which together account for around 80% of global exports. Moscow went even further a week ago by also banning the export of sunflower seeds and imposed a quota on sunflower oil exports.

“Argentina typically supplies more than 40% of the world’s traded soybean meal and oil, while Indonesia accounts for more than half of global palm oil exports,” the USDA said. It warned importers “will pay more” for oils as palm prices “hit record levels” and soy prices “rose to their highest levels in decades” after sunflower almost disappeared.

It comes as the UN’s Food and Agriculture Organisation (FAO) on Friday said its global food price index had climbed almost 13% month on month in March, the second month in a row a new record was set.

The FAO added palm, soy and rapeseed oil prices “rose markedly” last month due to “higher sunflower seed oil prices and the rising crude oil prices, with soy oil prices further underpinned by concerns over reduced exports by South America”.

“The oil shortage we are going to experience is just starting as sunflower oil will run out in weeks,” warned Andrew Crook, president of the National Association of Fish Fryers, who said “big processors and global chains” were forced to “buy as much alternative oil as possible”.

Gary Lewis of Britain’s KTC, which last month announced it would stop selling sunflower oil, added that although “we have stopped seeing the level of panic buying we saw some weeks ago”, buyers of oils are nonetheless “looking at this constantly changing situation”.

While shortages and rising costs were already being felt in the UK before the war, according to Tom Lock, founder of The British Snack Company, the invasion had “further pushed up costs, in particular oil”.

Sunflower oil replacements set to drive up food prices

A spokeswoman for Princes, which before the war sourced “large volumes of sunflower oil” from Ukraine for its Edible Oils Limited (EOL) joint venture with Archer Daniels Midland, said prices were “impacted by inflationary pressures in recent months, driven by factors such as the Covid-19 pandemic, transport, labour and energy pricing”.

“The primary inflationary challenge at the moment is limited availability of raw materials due to the situation in Ukraine”, the Princes spokeswoman said.

A major global supplier of wheat, corn, barley and sunflower oil, Ukraine had been knocked out of global markets by Russia’s invasion before it last month announced exports curbs of its own to shore up supplies for its war-wracked population.

“Now I can say that exports from Ukraine have completely stopped. Especially during the war, this is not possible to do,” said Garik Andriasain, who runs a farm in Ukraine.

European food markets were further hampered in recent weeks by industrial action by truckers in Spain, estimated to be the world’s sixth-biggest source of fruit and vegetables.

Jason Bull of Eurostar Commodities, an importer of fruit and vegetables to the UK, said the strike “caused quite a bit of disruption”, including “increased freight rates and fuel surcharges” and the need to find alternative suppliers in Italy and the US.