Influence of the Ukrainian crisis on global agriculture

| Foreign Markets |

Few people take the idea of “the butterfly effect” seriously, but it is not uncommon for geopolitical events in one place on Earth to influence situation in distant countries.

A challenge for South Africa

The Republic of South Africa is an important importer of maize and wheat, while Ukraine is the fourth and sixth largest exporter of those goods in the world respectively. A large proportion of Ukrainian maize and wheat is shipped to no other country than South Africa. Those two commodities stand for 80% of all imports from Ukraine to South Africa. What is more, 80% of cereals imported to this country is harvested in Ukraine. If the Crimean conflict escalates, the government in Pretoria might face difficulty with securing maize provisions as early as in April 2014.

How long will gas supply last?

Consequences of the situation in Ukraine are the most likely to be felt in Europe. At the moment, the Crimea is being annexed by the Russian Federation, while the European Union and the USA have been introducing “soft” sanctions towards the Russians responsible for escalating the conflict. However, it is still uncertain what the trade relations between Kiev and Moscow will look like in the future. We need to consider the importation of Russian natural gas, and the fact that almost 30% of gas used in Europe comes from the East. What is more, half of its quantity is sent via the Ukrainian territory. At the moment, Kiev is falling behind with payments for gas and the political and military moves of Moscow remain unknown. It is therefore difficult to foresee what the situation of the fertilizers market in the coming months is going to look like. Diversification of natural gas supply remains the only alternative, protecting the European chemical sector from interrupted delivieries of Russian gas. The only choice is to support the mechanisms leading to the implementation of energy security policy in Poland and the whole European Union.