The war in Ukraine has roiled commodity markets and significantly weakened global food security. Despite efforts to alleviate the impact of the crisis, several risks remain even one year after the outbreak of the conflict. On the positive side, provisional forecasts for this year's world production of wheat - one of the grains most affected by the crisis - points to a robust outturn, which could help assuage international markets.

Logistical risks
The conflict has caused significant damage to the infrastructure and logistics capacities in Ukraine, significantly lowering Ukraine's exporting capacity and raising the cost of trading grain. Solutions to compensate for these disruptions are frequently insufficient or only provide temporary relief. The distribution of sleeve bags, for example, has increased the country's storage capacities, but they are costly and might lower the quality of the stored grain. A lack of adequate storage has imposed economic pressures on farmers, forcing them to sell at a loss and potentially reducing future plantings.

Maritime shipping
The conflict has disrupted the operations of key seaports in the global grain trade. To mitigate these challenges, the Black Sea Grain Initiative and other international programmes have been instrumental, including the promotion of alternative transportation methods, such as train and river freight through the so-called Solidarity Lanes. However, these efforts have yet to restore the pre-war export pace and continue to be costly. In the case of the Black Sea Grain Initiative, the reduced scope in terms of port and route coverage remain limiting factors; in addition, cargo inspection times are being impacted by delays due to a reported lack of cooperation from Russian authorities. Shipping from Ukraine is also being impacted by high insurance costs as some reinsurers have excluded the Black Sea from coverage and banks are hesitant in financing deals from the Black Sea due to the high risks involved and fear of potential sanctions.

Trade policy risks
In an environment of high prices following the outbreak of the war in Ukraine, several countries imposed restrictions on food and feed exports leading to further disruptions in global markets. Fortunately, many of these restrictions had been lifted by mid-July 2022, but they have remained largely unchanged for the remainder of the year. At the same time, the Russian Federation claims that its fertilizer exports are being hindered by restrictions imposed by the US and the EU, which both deny this claim. Reduced fertilizer exports have made it more challenging for farmers to acquire the necessary inputs for crop growth.

Price risks
After experiencing sharp increases in the early months of the conflict, grain and soybean prices have returned to pre-war levels by the end of 2022. However, prices remain elevated and within the upper range of historical levels, as the market currently prices in a restrained flow of exports from the Black Sea, and for the next season a drastically cut grain harvest from Ukraine given the acute adversity of the production environment for next season. While price volatility has gotten back to 10-year average levels, possible outbursts of grain price variance still need to be monitored closely as markets remain highly sensitive to weather-related and geopolitical developments.

Near-term outlook
As regards the near-term outlook of global grain markets, early indications point to a strong wheat output this year, which could reach the second largest on record following the all-time high in 2022. Though total production is seen retreating, following four consecutive years of growth, world prospects are buoyed by expectations of area increases in several leading producers in 2023, amid the still attractive prices.