The Russia–Ukraine Conflict: A Global Impact Assessment in the Corn and Wheat Sectors

Abstract

According to data from the Food and Agricultural Organization of the United Nations (FAO), Ukraine was the fifth and ninth global producer and exporter of corn and wheat, respectively, before Russia’s invasion. The disruption of the supply chain in Ukraine in these food sectors due to the Russian–Ukrainian conflict can hamper global food security. Very little is known about how the war has impacted these important food sectors globally. This paper examines the global impact of the war on the corn and wheat sectors in the first year of the war and investigates the relationship between market vulnerability and trade ties with the conflicting regions. Analysis of FAO data shows that Ukraine suffered a 12.87% and 17.45% production decline in the corn and wheat sectors, respectively, compared to the 2012–2021 base years. Using the Acclimate economic network model, these shocks are applied to Ukraine’s corn and wheat network nodes to analyze their global impact. The production value and total losses are calculated and compared to the base year, both regionally and in some major global economic blocs. The results show that the corn sectors in Germany, Ukraine, Poland, and Belgium suffered the largest production value losses, while Ukraine, China, Venezuela, and Korea suffered the largest overall losses. In the wheat sector, Russia, Germany, Ukraine, and Canada suffered the largest production value losses, while Ukraine, Kazakhstan, Uzbekistan, and China suffered the largest overall losses. Overall, the corn sector was the hardest hit globally compared to the wheat sector, with the EU, the US, China, South America, and Africa being the hardest hit in the corn sector, while BRICS and Oceania were the hardest hit in the wheat sector. The study equally finds a strong correlation between increased regional food market vulnerability and Ukraine’s trade relations. These findings can contribute to better investment decisions, regional and sectoral emergency management planning, and the development of regulatory frameworks.

1. Introduction

From 2011 to 2022, Ukraine was the fifth global producer of corn, accounting for up to 2.7% of global production share, and the ninth global producer of wheat, with a global share of 3.3%. China, Egypt, Indonesia, Netherlands, and Turkey are some of its major trading partners in grains. A disruption of the supply chain of these major export commodities can have significant global food market effects, leading to food shortages and price hikes. The long geopolitical tensions between Russia and Ukraine that turned into a full-scale war in February 2022 [1,2,3,4,5,6] led to devastating regional and global food markets and economic crises because of a significant reduction in Ukraine and Russia’s exports and trade restrictions [7]. This event also affected other commodities and economic sectors, such as energy, housing, inflation, and the general cost of living [3,8,9]. Some drastic measures were taken by non-Russian allies to try and force Russia to seize hostilities and stabilize global market prices, such as sanctions and the signing of the Black Sea Grain Agreement between Russia, Ukraine, Turkey, and the United Nations [5,6,10,11,12,13,14]. This initiative was to facilitate the export of grains and fertilizers to the global market as a means of addressing global grain shortages and rising food prices due to war. Researchers found that the Black Sea Grain Initiative reduced wheat prices by 7.9%, compensating for approximately $21.48 billion of these costs [14], while others found that international cooperation manifested in the Black Sea Grain Initiative, Solidarity Lanes initiative, and the removal of export restrictions may have mitigated the price hike of 2022 by 13 percentage points [15].

From when the war broke out until the present day, researchers have investigated the socioeconomic impacts of the war, especially on supply chain disruptions and the subsequent food market shortages, food access, price hikes, and food insecurity. Jagtap et al. [16] investigated the Russia–Ukraine war and its implications for global food supply chains. They used a PRISMA (Preferred Reporting Items for Systematic Reviews and Meta-Analyses) approach, including gray literature, to investigate six key areas of food supply chains that will be most affected by the ongoing war. Their findings showed that although this conflict will affect the majority of the economies, the most affected economies are in Europe and Africa. Countries’ vulnerabilities to food supply disruptions caused by the Russia–Ukraine war were also investigated from a trade dependency perspective [17]. By applying a set of trade and socioeconomic indicators, they found that the external food supplies of 279 countries and territories were affected to varying degrees, with countries such as Georgia, Armenia, Kazakhstan, Azerbaijan, and Mongolia being extremely vulnerable because they depend almost entirely on a variety of food imports from Russia and Ukraine. Lin et al. [18] used satellite observations to show signs of wheat production reduction in Ukraine in the 2021–2022 season. Using a general equilibrium trade model, their findings show that this reduction led to a trade drop of 60%, soaring wheat prices by 50%, and severe food insecurity with decreased purchasing power for wheat (above 30%) in the most severe scenario, especially for countries that heavily rely on wheat imports from Ukraine, such as Egypt, Turkey, Mongolia, Georgia, and Azerbaijan. Zhang et al. [19] investigated the global environmental impacts of the food system from regional shock while considering the Russia–Ukraine war as a case study. They developed a novel framework to examine global food shortages from the Russia–Ukraine conflict and quantified the embodied environmental impacts of disturbed and alternative food supply chains. Their main finding is that the conflict could soon bring a 50–120 Mt shortage of nine dominant food products and cause temporal global cropland abandonment and a decline in greenhouse gas emissions. Many other studies show that the war led to significant price hikes in basic food commodities such as wheat, corn, and soybeans, with Russia- and Ukraine-import-dependent countries being the most affected [18,19,20,21,22,23,24,25,26,27,28,29,30,31,32]. A few studies looked at the effectiveness of some international policies that are geared toward mitigating the impacts of the war [14,15,33], highlighting the importance of maintaining the Black Sea Grain Agreement for long-term price stability.

To better understand how the war has affected some popular food markets, this article uses real-time agricultural production data from the Food and Agriculture Organization of the United Nations (FAO) to examine the regional and global impact of the Russian–Ukrainian war on two of Ukraine’s most produced and exported commodities (wheat and corn) in the first year of the war. The study equally examines the most vulnerable countries in these food markets and compares the impact of the war on the major global economic blocs. In addition, this work also aims to determine whether there is a correlation between Ukraine’s export partners (Figure 1) and vulnerability to war-related shocks. This information can be useful for better investment decisions, regional and sectoral contingency planning, and the development of regulatory frameworks. The rest of the paper is organized as follows: In Section 2, we present the data we used to quantify and distribute the shocks. Similarly, we present the economic network model and the EORA input–output data used to analyze the shock effects. In Section 3 and Section 4, we present the results and discussion, respectively, of our numerical experiment and conclude in Section 5.

2. Data and Method

The agricultural dataset used in this study is from the Food and Agriculture Organization of the United Nations (FAO), freely available online at https://www.fao.org/faostat/en/#data/QCL (accessed on 1 December 2024). This dataset covers all crops and livestock primary production quantities in tonnes. Global corn and wheat production data from 2011 to 2022 were downloaded, their means were calculated, and the global share displaced is shown in Figure 2a. This analysis shows that Ukraine is a major global producer of these commodities. This figure also shows that Ukraine produces more corn than wheat, while Russia produces more wheat than corn. Figure 2e,f show the top 10 corn- and wheat-producing regions, respectively, with Ukraine coming in at numbers 5 and 9, respectively. Figure 2g shows Ukraine’s top 10 most produced items, with corn and wheat coming in at the 1st and 2nd positions, respectively. Figure 2b,c look at the time series for Ukraine and Russia in the corn and wheat sectors, respectively, from 2011 to 2022. This figure shows a significant drop in these grains for Ukraine in 2022 compared to 2021, while Russia experienced a production increase for both crops. To capture the war’s impact and eliminate any biases due to market fluctuations, the mean of 2012 to 2021 was calculated for Ukraine for both crops and subtracted from 2022 to give a production decrease of 12.87% for corn and 17.45% for wheat. These values serve as shocks (Figure 2d) that are applied to the nodes of the corn and wheat in Ukraine in the demand-driven economic network model Acclimate. Their regional and global impacts were investigated by calculating the production and total losses compared to the baseline scenario (no war). The total losses are the sum of the direct and indirect losses. Ukraine and Russia, the two conflicting parties, suffer direct losses, while other countries suffer indirect losses solely from trade relations with the conflicting parties. Data from the World Integrated Trade Solutions (WITS) were also used to quantify Ukraine’s trading partners, which is shown in Figure 1 and can be found at https://wits.worldbank.org/ (accessed on 1 December 2024).

Acclimate is an agent-based economic model that simulates the propagation of output losses caused by local demand, supply, or price shocks in the global supply network. This economic network model was developed by a team of scientists at the Potsdam Institute for Climate Impact Research (PIK) in Potsdam, Germany. The model has been tested and found to be very robust in simulating economic shock propagation in the global supply chain network caused by climate-related disasters and some international relation fallouts, such as Brexit [34,35,36,37,38,39]. For a full description of the model, see [34]. This model consists of highly interconnected regional sectors, where the regions represent each country in the world and the sectors are the various industries that make up a country’s economy, such as the agricultural sector, food, hotels and restaurants, wholesale trade, oil and gas, timber, transportation, finance, mining and quarrying, etc. The economic network used in this study is the EORA26 2015 economic network, which breaks down the agricultural sector into corn and wheat sectors using the FAO primary crop and livestock production dataset in tonnes for 2015. This network also consists of over 15,909 economic sectors in more than 190 countries. The 12.87% reduction in corn and 17.45% in wheat production of Ukraine in 2022 compared to the base years (2012–2021) are applied as shocks on the nodes of the corn and wheat sectors of Ukraine in the acclimate network model. Their global impacts were assessed by calculating the changes in production value, and total losses were also calculated as the sum of the direct and indirect losses. A comparative study was carried out to uncover the most and least vulnerable regional markets.

3. Results

Applying the −12.87% shocks for corn and −17.45% shocks for wheat in Ukraine’s corn and wheat sectors, this study investigated changes in the global corn and wheat production value and total losses against a baseline scenario (to war). Figure 3 shows the changes in the value of corn production and total losses and the top 20 regions most and least affected. Negative production values (red) are regions most impacted, while positive production values (blue) are regions least impacted. For total losses, negative losses (red) are regions least impacted, while positive losses (blue) are regions most impacted. Germany, Ukraine, Poland, and Belgium suffered the most production value losses, while China, the USA, the Netherlands, and Argentina were the least affected. For total losses, Ukraine, China, Venezuela, and Korea suffered the most, while Germany, Poland, the USA, and Belgium suffered the least. These figures show Europe as the region most affected in terms of production value losses, while China and many countries in Sub-Saharan Africa suffered the most total losses. In Figure 4, the global change in wheat production value and total losses compared to the 2012–2022 baseline is investigated. The figure also presents the top 20 most and least impacted regions. Negative production values (red) are regions most affected, while positive production values (blue) are regions least affected. For total losses, negative losses (red) are regions least affected, while positive losses (blue) are regions most affected. Russia, Germany, Ukraine, and Canada suffered the most production value losses, while China, Kazakhstan, France, and Uzbekistan were the least affected. For total losses, Ukraine, Kazakhstan, Uzbekistan, and China suffered the most total losses, while Russia, Germany, the Netherlands, and France suffered the least total losses. Most of the negatively impacted countries are found to have some strong trade ties with Ukraine, as seen in Figure 1, which shows that a disaster impacting a certain region can also have profound impacts on its trading partners.

Figure 5 analyzes the shocks for the various major economic blocs for both the corn and wheat sectors. This figure shows a significant negative shock for the EU corn and wheat sectors in the initial phase of the conflict. The impact on the corn sector is greater than on the wheat sector. Over the course of the days, the corn and wheat sectors in the EU gradually recovered but were still only slightly affected. In the US, the corn sector was hit harder than the wheat sector in the first few days of the war. While the US production value gradually recovered over time, these sectors continued to suffer total losses. The impact of the war was far less in China than in the US and the EU. A look at the BRICS bloc shows a similar pattern to that of the EU, but the wheat sector was much more affected than the corn sector. This could be due to the fact that production and trade in the wheat sector in these countries are far greater than in the corn sector. In Oceania, the corn sector was more affected than the wheat sector, although the wheat sector was more affected at the beginning of the war. In South America and Africa, a similar pattern can be observed, with the corn sector being the most affected compared to the wheat sector. Figure 6 compares the impact of the war on the corn and wheat sectors in some global economic blocs. This figure shows that Europe suffered the largest overall losses in the corn and wheat sectors and experienced the largest decline in the production value of corn, while Asia experienced a significant decline in the production value of wheat. North America was the least affected of all continents. Overall, these analyses (Figure 5 and Figure 6) show that the disruption of the supply chain for a major export commodity generally has a major global impact. To protect against future economic crises, excessive dependence on a particular region or country for the supply of a commodity should, therefore, be avoided by creating new production centers around the world.

4. Discussion

Successive disasters and geopolitical conflicts, such as the COVID-19 pandemic, the war between Russia and Ukraine, the war between Israel and Hamas, and the extreme effects of climate change have dealt a severe blow to the global economy by disrupting global supply chains and leading to worldwide shortages, price hikes, inflation, economic stagnation, recession, loss of wealth, food insecurity, and deaths. Increasing geopolitical tensions between major economies and agricultural producers, as well as crises related to climate change, mean that there are likely to be more geopolitical conflicts and climate-/health-related disasters in the future. To protect against future global humanitarian crises caused by disasters in one part of the world, there is a growing need to build more resilient supply chains and raise awareness. Following the global economic hardship caused by the Russia–Ukraine war, some remedial strategies have been implemented to reduce the cost of living and improve access to basic necessities such as food and energy. To some extent, international sanctions have helped to reduce Russia’s hostilities compared to the early days of the invasion, while the Black Sea Grain Agreement signed between Russia, Ukraine, Turkey, and the United Nations [33] helped stabilize global food prices and prevent famine in vulnerable countries. The continued renewal of this agreement is crucial to maintaining global food security.

In order to facilitate the implementation of better investment decisions, regional and sectoral contingency planning, and regulatory framework development, this paper assesses the regional and global impact of the war on some major agricultural commodities produced and exported by Ukraine. Compared to the base years 2012–2021, the study shows that the Ukrainian corn and wheat sectors have been affected by up to 12.87% reduction in corn production and 17.45% reduction in wheat production. The study analyzes the global impact of this decline on the production value and total losses of maize and wheat. The results show that Europe, followed by African countries, was hit hardest by the war. The results are in line with those of Jagtap et al. [16] in their study on the Russia–Ukraine war and its impact on global food supply chains. Their findings showed that while this conflict affects the majority of economies, the most affected economies are in Europe and Africa. The analysis in this study also found a strong relationship between countries that heavily depend on Russia and Ukraine for imports of some food commodities with high vulnerability to losses. These findings are consistent with many studies carried out on regional vulnerability to the Russia–Ukraine war [18,19,20,21,22,23,24,25,26,27,28,29,30,31,32].

Limitations

Some drawbacks of this work are as follows:

• The FAO data used might have induced some inaccuracies during data collection, small farms might have been underrepresented or ignored, and the survey sample might not have represented the entire agricultural industry. Moreover, the WITS trade network data might not have captured all trade routes.
• The war between Russia and Ukraine is still ongoing but not as intense as it was in 2022, so it is difficult to take stock of the economic damage caused by the war. That is why we considered a scenario-based modeling approach. Reliance on scenario-based modeling may not fully reflect the evolving situation and capture its complexity.

5. Conclusions

The increasing uncertainty in international relations between major world powers due to the fact that each country’s interests come first when it comes to acquiring resources for regional development and better welfare can increase geopolitical tensions that can lead to escalating conflicts. These conflicts can seriously disrupt key food production and supply routes, leading to increased food insecurity, especially in regions that are heavily dependent on imports from the conflicting parties. In order to better prepare for future conflicts between major breadbaskets, this study simulated the regional and global impact of a disruption of the Ukrainian maize and wheat supply chain in the first year of the Russia–Ukraine crisis. The study analyzed FAO data on Ukraine’s annual corn and wheat production for 2022 compared to the years 2012 to 2021 and concluded that corn and wheat production in Ukraine decreased by 12.87% and 17.45%, respectively. When the Ukrainian corn and wheat sectors were shocked with this data in the Acclimate economic network model and the global impact was assessed, the results showed that the corn sectors in Germany, Ukraine, Poland, and Belgium were the most affected by production value losses, while Ukraine, China, Venezuela, and Korea suffered the largest overall losses. In the wheat sector, Russia, Germany, Ukraine, and Canada suffered the largest production value losses, while Ukraine, Kazakhstan, Uzbekistan, and China suffered the largest overall losses. Overall, the corn sector was the hardest hit globally compared to the wheat sector, with the EU, the US, China, South America, and Africa being the hardest hit in the corn sector, while BRICS and Oceania were the hardest hit in the wheat sector. The EU and Africa proved to be the two most affected continents in terms of these commodities. The corn market seems to be bigger than the wheat market. Hence, it suffered greater losses. Also, Ukraine produces more corn than wheat, which makes the disruption in the supply chain for corn more impactful than for wheat.

Many countries have developed strategies to mitigate the impact of the war between Russia and Ukraine on their food markets. For example, as one of the countries most affected by the war, Germany has increased its imports of agricultural commodities from other countries to reduce its overdependence on Ukraine and Russia. The German government also supported domestic agriculture through incentives, the temporal control of market prices, the introduction of the energy price cap, and the promotion of the cultivation of alternative crops to reduce dependence on imports of some specific crops. For example, to reduce dependence on sunflower oil imports from Ukraine, Germany has promoted the local production of alternative oilseeds such as rapeseed. A similar strategy has been adopted by most countries. International cooperation through the reduction of tariffs on imported goods, the continued renewal and maintenance of the Black Sea Grain Agreement, the diversification of trading partners in the food sector, regional market price adjustments, and measures to increase local production of some staple foods through large-scale agriculture (plantation farming), particularly in sub-Saharan Africa, can help mitigate future global crises affecting key breadbaskets.

Future Work

In the future, we look to develop detailed shock models using factors affecting regional agricultural losses and real-time food market prices. We also look forward to investigating the ripple effects of the war on other economic sectors, such as oil and gas, transport, and manufacturing. We will also try to model other highly probable geopolitical events, such as the conflicts between Russia and NATO, China and Taiwan, the USA and China, and Russia and the USA, to project possible future crises in the agricultural sector for early warning and disaster preparedness.