The Russian invasion of Ukraine in early 2022 caused wheat and corn prices to spike 30% and 13%, respectively, and threatened a worldwide food crisis. International efforts to mitigate a food security crisis via the Solidarity Lanes and the Black Sea Grain Initiative (BSGI) have successfully allowed grain exports out of Ukraine. However, Russia’s recent withdrawal from the BSGI, coupled with increased bombings of Odesa and Danube River ports, caused another price spike for these grains. Further aggression in the region risks halting Russian wheat and Ukrainian corn exports across the Black Sea, the main export channel for both countries.

Russia accounts for about 18% of global wheat exports and 2% of worldwide corn exports, while Ukraine provides 15% of global corn exports and only 9% of wheat. Why have these statistics spooked the grain commodity markets? Colin A. Carter, distinguished professor with the Department of Agricultural and Resource Economics at the University of California, Davis, explains that “the simple answer is that Russia’s aggression in the Black Sea region increases the risk of the world grain market losing the number four corn exporter (Ukraine) and the number one wheat exporter (Russia) if grain vessels on the Black Sea become targets of drone strikes.” If all grain shipped through the Black Sea by Russia and Ukraine were halted, it would cut off 27% of global wheat exports and 17% of global corn exports.

Carter and Steinbach’s analysis of the corn and wheat markets shows a notable increase in market uncertainty since the start of the Russia-Ukraine War, as evidenced by measuring "implied volatility." Implied volatility is the expected price volatility of a commodity like corn or wheat in options trading. In March 2022, shortly after the invasion of Ukraine, the implied volatility of corn jumped from 25% to 60%, while wheat rose from 40% to 160%. There was also a second peak in volatility in July 2023, after Russia pulled out of the BSGI, suggesting further fears that grain exports through the Black Sea could be cut off from world markets.

When Russia withdrew from the BSGI, there was another brief price spike in wheat (up 15%) and corn (up 10%). Wheat markets have consistently been more affected by conflict in Ukraine, specifically in the Black Sea, than corn prices. This difference can be explained by the fact that 95% of Russian grain is exported through the eastern portion of the Black Sea, while around a quarter of Ukrainian grain is shipped by truck and rail and would not be as affected by the conflict in the Black Sea. By volume, there is around 1.7 times more wheat than corn shipped from Black Sea ports. The wheat market is more politically charged than the corn market because wheat is primarily a food grain. Therefore, the greatest risk to global food security moving forward may no longer be getting grain out of Ukraine—due to the continued success of the Solidarity Lanes—but rather the loss of wheat exports to the world market that could result from Russia backing out of the Black Sea Grain Initiative.

To learn more about how Russian aggression in the Black Sea might affect global food security, read the full article by Colin A. Carter (distinguished professor in the Department of Agricultural and Resource Economics at UC Davis) and Sandro Steinbach (associate professor in the Department of Agribusiness and Applied Economics and the director of the Center for Agricultural Policy and Trade Studies at North Dakota State University): “Russian Weaponization of Food Rattles Global Markets,” ARE Update 26(6): 1–4. UC Giannini Foundation of Agricultural Economics, online at https://giannini.ucop.edu/filer/file/1694637435/20778/.

ARE Update is a bimonthly magazine published by the Giannini Foundation of Agricultural Economics to educate policymakers and agribusiness professionals about new research or analysis of important topics in agricultural and resource economics. Articles are written by Giannini Foundation members, including University of California faculty and Cooperative Extension specialists in agricultural and resource economics, and university graduate students. Learn more about the Giannini Foundation and its publications at https://giannini.ucop.edu/.