As Trump, Putin agree to talks on ending Ukraine war, global oil and food markets eye supply relief

Trump said negotiations would start immediately, and he would probably meet Putin in Saudi Arabia in the “not-too-distant future,” according to a social media post. Analysts have said a potential de-escalation could result in more predictable trade flows, reduced price fluctuations, and stabilised energy costs worldwide.

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Fertilizer, grain markets watch closely

The war’s impact on global fertilizer and agricultural markets has been significant, with Moscow’s invasion of Ukraine disrupting supply chains and driving up input costs for farmers. A resolution to the conflict could ease supply constraints, increasing the availability of key fertilizers and lowering costs for farmers, Bloomberg reported, citing experts. This would come at a time when global grain prices are already under pressure, further squeezing agricultural companies reliant on high input prices.

Russia and Ukraine together accounted for a third of global wheat exports last marketing year. However, according to Russian government data cited by Reuters, Russia’s winter grain crops are reportedly in their worst-ever condition, with 37 percent classified as being in poor shape -- far above the five-year average of 8 percent.

Meanwhile, Ukraine’s wheat exports have faced logistical challenges due to damaged port infrastructure, forcing a reliance on alternative routes such as Romania’s Constanta port. The Reuters report said that the frontrunner in Romania’s presidential runoff this Sunday has suggested halting Ukrainian grain exports via Romania if elected, a move that could disrupt trade routes.

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Implications for India’s edible oil imports

A potential end to the war may also impact India’s edible oil imports, particularly sunflower oil. Russia and Ukraine together supply over 70 percent of the world’s sunflower oil, and intense competition between the two has driven down prices, leading India to purchase a record 500,000 metric tons of sunflower oil for June 2024 delivery. According to traders cited by Reuters, a return to stable trade flows could influence future pricing trends, particularly if geopolitical tensions ease.

Long-term adjustments in global food supply

Despite initial fears of a prolonged food crisis following Russia’s invasion, global wheat prices stabilised after an early spike, though they remain marginally higher than pre-war levels. A study by the University of Illinois and Texas Tech University found that while wheat prices initially surged by 28 percent, markets adjusted over time, with price impacts levelling out.

The World Bank had also warned that Ukraine’s reduced grain exports could have serious implications for food security in several countries that relied heavily on Ukrainian wheat. Many nations mitigated the impact by sourcing from alternative suppliers such as Russia and Romania, while others substituted wheat imports with other grains.

These adaptive strategies, along with resilient global supply chains, prevented a severe long-term crisis. However, an end to the war could further stabilise global food markets and allow Ukraine to regain its position as a key wheat exporter, potentially reigniting trade flows.

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