The war in Ukraine had immediate effects on the commodity market through high prices and pronounced volatility, which would lead to secondary effects of inflation and exacerbate food insecurity, according to the World Bank report “War in the Region”.
The report addresses the humanitarian and economic effects of the war, noting that it threatens the stability of geopolitical relations. Economic output in Europe and Central Asia is expected to contract by 4.1% in 2022, making it the second major regional shock and recession in two years.
The World Bank said the economic impact of the war was being felt through a number of global channels, including financial and commodity markets, trade and migration relations, and trust. Wheat prices are up 40% since the war broke out in February. The war disrupted the planting and harvest seasons in Ukraine, including other crops such as corn, barley, and sunflower; destruction of critical fields, infrastructure and production; The suspension of transportation from the Black Sea.
Russia and Ukraine account for a quarter of global wheat exports, with several countries importing 75% or more of their wheat from Russia and Ukraine. The World Bank said Russian ports were operating, but insurance rates had skyrocketed and shipments were prevented from leaving.
Agricultural production inputs are also suffering from shortages and rising prices. Russia and Belarus, which are subject to international sanctions, provide 38% of the world market by value of potassium fertilizers, 15% of nitrogen fertilizers and about 17% of compound fertilizers. Russia is the world’s largest fertilizer exporter, accounting for 13% of global exports.
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