Connect with us

Hi, what are you looking for?

Supply

Invasion makes Ukraine’s role as global ag exporter uncertain

Global political uncertainties weighed on the minds of speakers at the U.S. Department of Agriculture’s annual outlook forum on Thursday and Friday, even as U.S. ag exports are forecast to be worth billions this year. 

The Russian invasion of Ukraine is anticipated to have an effect on global agricultural trade but it’s uncertain what that impact will be. 

Ukraine is considered to be the fourth-largest exporter of agricultural products in the world, exporting to China, Middle East, North Africa and Europe. Exported products include wheat, corn and coarse grains.

Should Ukrainian and Russian exports be affected by a potential prolonged conflict, the global market could lean on other exporters, such as the U.S. and Canada. 

“There’s a lot of coordination we need to do with our allies and within our own government and economy to look at appropriate responses to the Russian actions,” said Ambassador Katherine Tai with the Office of the U.S. Trade Representative at the annual USDA forum. “The critical piece in terms of coordination between allies and within our own government and economy is to figure out how to respond appropriately and also to look after the impacts to our economy. … This is an area that we have to work very closely to assess where the impacts are going to be, especially when it comes to agricultural trade.”

U.S. Secretary of Agriculture Tom Vilsack, who was interviewing Tai, said the Ukrainian situation “does and will have an impact. It’s something we’re going to keep an eye on.”  

But Eastern Europe isn’t the only area of concern. China is another uncertainty, with speakers at the two-day USDA event encouraging U.S. producers to look for additional trading partners among other Asian nations and countries in the Middle East and North Africa. 

“I think farmers in China will continue to face a series of challenges, and they’re going to need the partnership with the U.S. in terms of being able to feed the people of China. But make no mistake about it, we’re dealing with a country where there are many state-controlled enterprises. And that can have sometimes unintended consequences in terms of transparency, in terms of information that’s available that impacts and affects [the market]. Because of the size of this market, they have an impact on global markets,” Vilsack said Thursday. “So we’re going to make sure that we continue to look for ways in which we can encourage greater transparency, a set of rules that we all can live by so that we have confidence and faith in the market.”

He continued, “It’s important for people in the United States to understand that as significant as that China market is, it is absolutely imperative that we diversify beyond just China, that we look for ways in Southeast Asia, the Middle East, Africa, Latin America. There are enormous opportunities available in those markets as well. We don’t want to be overly dependent on any single market.”

Although global sociopolitical uncertainties weighed on officials’ minds, USDA persisted in its outlook for 2022.

Last calendar year was a record year for U.S. agricultural exports, while domestic demand was also high, according to USDA Chief Economist Seth Meyer. While the reopening of restaurants and retail establishments lifted demand for food services, demand for retail food — the kind bought at a grocery store — remained elevated as the U.S. entered into the second year of the COVID-19 pandemic. 

That elevated demand will support prices this year, Meyer said, adding that the conflict in Eastern Europe will have an unknown impact on market conditions. 

USDA anticipates that U.S. agricultural exports will be a record $183.5 billion in fiscal year 2022, up $8 billion from 2021. Soybean exports are expected to grow $2.9 billion higher to $31.3 billion amid higher prices and lower global supplies, while overall grain and feed exports are expected to grow $1.4 billion to $42.9 billion amid higher wheat and feed and fodder forecasts.

Meanwhile, imports are forecast at a record $172.5 billion.

These figures revise a November 2021 forecast but don’t take into account the invasion of Ukraine. Other potential headwinds for the year include continuing market recovery from the COVID-19 pandemic, supply chain constraints, energy prices, monetary policy and labor market tightness, according to USDA.

“One could take the position that the ag outlook could be sour and uncertain. But that’s not my position. And I don’t think it should be your position. I think American agriculture is resilient. I believe it is innovative. And I believe American farmers, ranchers and producers are committed to a sustainable future,” Vilsack said. “And for that reason, I believe that the outlook for agriculture is quite strong and positive.”

Subscribe to FreightWaves’ e-newsletters and get the latest insights on freight right in your inbox.

Click here for more FreightWaves articles by Joanna Marsh.