Russia-Ukraine Conflict Disrupts Black Sea Shipping, Boosts Global Food Prices

The ongoing conflict between Russia and Ukraine is putting fresh upward pressure on global food prices due to disruptions in Black Sea shipping and crop losses in Europe.

A recent drone attack by Ukraine damaged two of Russia's largest grain export terminals at the Black Sea port of Novorossiysk, forcing a suspension of operations. The combined annual capacity of these terminals is 15.6 million tonnes.

The attacks on ports and vessels have restricted movement through key Russian agricultural export routes, including Rostov-on-Don, Taganrog, Taman, Kavkaz, and Novorossiysk. Russia has also targeted Ukrainian port facilities and vessels around the Greater Odesa region, which handle about 90% of Ukraine's agricultural exports.

The US Department of Agriculture has projected a 7.5% decline in EU wheat production from 145.1 million tonnes to 134.2 million tonnes this marketing year. Meanwhile, EU maize production is expected to fall from 56.8 million tonnes to 50.2 million tonnes, its lowest level in nearly two decades.

The combination of lower European production and disruptions to Black Sea trade is already affecting food prices. The FAO's benchmark food price index reached a three-and-a-half-year high in July, with US wheat export prices at $321 per tonne, up from $235 a year ago.