Risk Center

Extreme weather amplifies risk of global food shortages

The United Nations’ Food and Agriculture Organization (FAO) cited that the price for edible oils rose to almost 250% of standard price levels in 2022, precipitated by Russia’s invasion of Ukraine which blocked Black Sea exports of sunflower oil. Ukraine is the world’s largest supplier of sunflower oil, and about 76% of global exports are shipped through Black Sea ports. As sunflower oil became increasingly inaccessible on the global market, consumers turned to alternatives like palm oil and soybean oil. Amid the increased demand, major exporting countries including Argentina and Indonesia took steps to protect domestic supply, cutting off outbound shipments of soybean and palm oil. Export bans were swiftly implemented as coexistent challenges, such as drought and heat waves earlier this year in Argentina, had already shrunk domestic stockpiles.

Table 1: Overview of disruptions for key agricultural commodities; green = no disruption; yellow = minor disruption; orange = moderate disruption; red = severe disruption (source: Everstream Analytics).

The global supply of grains, namely wheat, and corn, is vulnerable for similar reasons. The war in Ukraine stranded around 25 million tons of grains from last year’s harvest in silos across Ukraine and at Baltic ports. This, in parallel with sanctions on Russia impacting international distribution, cut off roughly one-third of global supply. A July 22 agreement 22 between Russia and Ukraine to unblock grain exports from major Black Sea ports came as a major relief to global grains and vegetable oils supply concerns, with the Food and Agricultural Organization (FAO) Food Price Index plunging almost 9% in July; its biggest decline since 2008.

Grains and wheat

On July 22, Russia and Ukraine agreed to unblock agricultural exports from Black Sea ports, aimed at alleviating the strain on global grain supplies and food price inflation. The deal established safe corridors in and out of the ports of Yuzhne, Chornomorsk, and Odesa. The three ports accounted for approximately 65% of Ukraine’s total grain exports over the past five years. The global wheat market also eased following the Russia-Ukraine deal on grain exports. The FAO Cereal Price Index plunged by 11.5% in the month of July, with global wheat prices dropping by as much as 14.5%. Amid an improving outlook, several countries took steps to facilitate the resumption of the global wheat trade. Serbia lifted its wheat export ban in late July, while Romania reopened a Soviet-era rail link connecting its Danube River port of Galati to Ukraine. In late July, Germany’s state-owned rail company Deutsche Bahn also announced plans to transport grains and wheat via Romania and Poland to the German ports of Rostock, Hamburg, and Brake.

Though not part of the formal UN-negotiated agreement, Western nations eased sanctions on Russian agricultural exports, including grains and fertilizers. In exchange, Russia agreed to cease targeting vessels in transit, an effort to incentivize reluctant and risk-averse shipping companies to resume routes. However, Russia weakened the credibility of its word when it struck the port of Odesa with a string of explosives only hours after signing the grain export deal. As a result, many exporters likely will continue favoring Danube River ports over Black Sea ports.

Ongoing heat in the U.S. and Europe threatens grain availability, especially corn. July is the most critical month for corn, which goes through the yield-sensitive pollination stage in the U.S., Europe, and China, three of the world’s top five corn-producing regions. Crop conditions in May steadily declined and are now recorded as the sixth worst on record in 22 years, forecasting a below-average annual crop yield in the U.S.

Figure 2: U.S. corn conditions indicate lower-than-usual yields (source: Everstream Analytics).

Both France and Romania, Europe’s top two corn producers, have suffered unprecedented heat and dryness in July. As these conditions are likely to continue into August, EU annual crop output will register well below average volumes. Extreme heat is lowering water levels on the Rhine River, vital for agricultural transport. Water depletion is likely to continue throughout August, ultimately dropping so significantly that vital transport operations will be halted.


The China-bound Star Helena, carrying a cargo of 45,000 tons of sunflower meal, was among the first vessels to depart Ukraine following the signing of the agricultural export deal with Russia. Shortly thereafter, the Italy-bound Mustafa Necati vessel departed, carrying another 6,000 tons of sunflower oil. Despite this positive development, Ukraine’s sunflower meal exports are forecast to decline from 66% to 40% of the global share. Similarly, its sunflower oil exports are forecast to plunge from 50% to 35% of the global share.

Palm oil

From August 1, Indonesia has increased the permitted palm oil export volumes to 9x domestic sales, up from the 7x that was previously established. Meanwhile in Malaysia, daily losses of palm oil fruit are still estimated at 57,880 tons due to an acute shortage of plantation labor. The labor crunch was further complicated in mid-July when Indonesia suspended sending its citizens to work in Malaysia over a breach in a worker recruitment deal. Though the suspension was lifted on August 1, the palm oil industry in Malaysia is still 120,000 workers short of what is needed to reach and maintain desired production levels. Despite the production challenges in Malaysia, the stockpile of palm oil fruit in Indonesia is expected to lead to a further decrease in global palm oil market prices.


Seasonal monsoon rainfall deficits in India, the world’s largest rice exporter, has caused a decrease in rice cultivation estimated at 13%. India’s top rice-producing states of Bihar, West Bengal, and Uttar Pradesh, together contribute about one-third of the country’s annual rice production volumes. Across the rice acreage within these areas, summer monsoon rainfall through early August has only registered 75% of normal which also ranks as the fifth lowest of the past 30 years. Compared to last year, rice production could fall by up to 8%, or 10 million tons. The certainty of a lower output is prompting concerns that the Indian government may impose export curbs in response to rising prices. Production success will be dependent on the reliability and consistency of future monsoon rains.


On August 5, India announced that it will allow sugar mills to export an additional 1.2 million tons for the current marketing year running through September. This is in addition to the previous cap of 10 million tons, after which it became clear that raw sugar stockpiles in ports and warehouses were quickly exceeding capacity. A variable monsoon rainfall pattern across central and northern India has complicated transport logistics from sugar mills to ports, potentially delaying exports. In the next two months, authorities will decide if an export cap on sugar will be implemented for the 2022-2023 season which begins in October. The speculated cap is between 7-8 million tons.

Outlook and recommendations: Key developments to monitor this summer

Though measured progress has been made on the geopolitical front, continued extreme weather throughout August will complicate the global food supply. Heat waves and drought persist across the Americas and Europe. Meanwhile, concurrent risks from localized flooding in parts of China and India add to the possibility of inadequate yields and lower production. Though the resumption of agricultural exports from Ukraine provides hope for global wheat and grains supply, success will depend largely on Russia’s willingness to cease disrupting port operations. The Odesa port bombing indicates that success is not guaranteed, and progress is quickly reversible. Until guarantees can be made, it is likely that shippers will avoid such export routes.

Everstream clients are receiving detailed information about this disruption.

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