EDITOR'S COMMENT
OILS & FATS INTERNATIONAL
VOL 38 NO 3 MARCH/ APRIL 2022
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Oils & Fats International
2 OFI – MARCH/APRIL 2022
Comment March.April 2022.indd 1
War in Ukraine It has been four weeks since Russia’s shocking invasion of Ukraine on 24 February. The invasion has forced 3M people to flee the country, internally displaced millions and killed thousands, and has not only impacted the vegetable oil market but wider global food, fertiliser and energy supplies as well.
Russia and Ukraine account for more than 80% of world sunflower oil exports and the closure of Ukraine’s Black Sea ports has left buyers scrambling for alternative palm and soyabean oils. The result has been record-high edible oil prices, with palm oil futures hitting US$1,736.26/tonne on 16 March, having surged by more than 50% this year. As well as the edible oil market, Russia and Ukraine play a key role in global food production and supply. Russia is the world’s largest exporter of wheat and the FAO says restrictions on its exports will have significant food security repercussions, particularly for around 50 countries – many of them low-income nations in northern Africa and Asia – that rely on Russia and Ukraine for some 30% of their wheat supply. Russia is also the world’s top fertiliser exporter, with the war driving up prices for natural gas, a key ingredient for fertiliser manufacturing. Futures prices for urea fertiliser have jumped 32% since the invasion began. Yara – one of the world’s largest fertiliser producers which makes much of its product in Ukraine – is only running at around half its normal capacity. The Russians have also suspended fertiliser exports to the west. Higher fertiliser prices will force farmers to increase their crop prices at harvest or use less of the input. On the ground in Ukraine, massive population displacement has reduced the number of agricultural labourers and workers. The closure of Ukraine’s Black Sea ports and limited railway routes will hamper grain and oilseed shipments. Rising insurance premiums for the Black Sea region will exacerbate already high shipping costs, while it is unclear what the effects of damage to port, storage and processing facilities will be over the longer term. Ukraine’s spring plantings face a particular challenge. Trade sources say that most of the country’s big producers had already booked fertilisers and seed supply. But how will farmers reach areas for planting amid active conflict zones or in Russian-occupied land? How will they tend, apply inputs, harvest and prepare the soil for the next harvest? Corn, sunflower, soyabean and spring rapeseed planting usually starts at the end of April and runs through to June, so there is still some time. It all depend on when the war ends. On 16 March, Ukrainian President Volodymyr Zelensky said peace talks with Russia were beginning to “sound more realistic” and he has admitted that Ukrainians now understand that the Western defensive alliance of Nato will not admit them as a member. Preventing Ukraine from joining Nato has been a major goal of Russian president Vladimir Putin, who was initially aiming to overrun Ukraine and depose its government. Latest reports from peace talks suggest Russia is no longer seeking to overthrow the government and is instead aiming for a neutral Ukraine. Ukraine is demanding a ceasefire and the withdrawal of Russian troops, but also legally binding security guarantees that would give the country future protection. However, there is still the future status of Crimea, which Russia seized in 2014, and the Russian-backed eastern statelets in Luhansk and Donetsk to be resolved. For those of us on the sidelines of this war, we can only pray that the bombardment of dozens of Ukrainian towns and cities will end soon. Having witnessed Putin’s shattering of European peace, it is clear that Western leaders will never view Russia in the same way again and that will affect future geo-political relations going forward. Serena Lim – serenalim@quartzltd.com www.ofimagazine.com
22/03/2022 08:57:54
