Ukraine Grain Exports Face New Challenges Amid Conflict and Climate Pressures

Ukraine’s grain exports, a cornerstone of global food security, have entered a precarious phase in early 2025. A combination of Russian military attacks, drought-driven harvest declines, and geopolitical maneuvering has left the sector reeling. The implications for global commodity markets, food inflation, and Ukraine’s economic recovery are profound—and investors must navigate these risks carefully.

The Decline in Ukraine’s 2025 Harvest

Ukraine’s wheat harvest for the 2025-26 season is projected to hit a 13-year low of 17.9 million metric tons (MMT), a 23% drop from 2024, according to the U.S. Department of Agriculture (USDA). The primary drivers are extreme drought during planting and farmers’ reduced profitability, which curtailed planted areas. Corn production has also collapsed to a 19-year low, with exports falling 16% year-on-year by May 2025.

While Russia’s wheat harvest for 2025-26 is expected to remain robust at 79.7–82.5 MMT, its exports are also declining—14% to 48 MMT in 2024-25—due to drought and reduced domestic stocks. This leaves global wheat supplies strained, with stocks-to-use (SU) ratios hitting 15.89% in late 2024, the lowest since 2021.

Russian Attacks: Undermining Infrastructure and Markets

Russia’s relentless strikes on Ukrainian ports and grain ships have exacerbated the crisis. Since late 2022, over 300 port facilities and 23 civilian vessels have been damaged, with $40 million in damages reported in October 2024 alone. The October attacks destroyed ~100,000 tons of agricultural products, including shipments to Egypt, Italy, and the UN World Food Programme (WFP).

The strategic aim is clear: to cripple Ukraine’s export revenue and force reliance on Russian grain. This has already started reshaping global trade flows. Russia’s wheat exports to sub-Saharan Africa surged 39% year-on-year in 2024, now accounting for 20% of its total wheat exports, as countries like Kenya and Somalia pivot to cheaper Russian supplies.

Global Wheat Markets: Tightening Supply, Rising Prices

The dual declines in Ukrainian and Russian exports are pushing global wheat prices higher. Wheat futures spiked 2.2% after Russia’s September 2024 attack on a grain ship, while global cereal prices rose further in October 2024.

By May 2025, the USDA warns that SU ratios could hit decade-plus lows, approaching the 14.74% record low of 2020-21. This tightness could push prices to levels last seen during the 2022 war-induced crisis, with knock-on effects for food inflation in developing nations.

Ukraine’s Resilience and International Support

Despite the setbacks, Ukraine has sustained exports via alternative routes, including the Ukrainian Corridor through NATO member states’ territorial waters. Over 51 MMT of agricultural goods have been shipped since August 2023, exceeding pre-war volumes. However, rising war-risk insurance premiums and infrastructure damage have raised costs, complicating competitiveness.

International aid is critical. USAID’s AGRI-Ukraine initiative, backed by $2.26 billion in private-sector investments, aims to boost agricultural efficiency. Meanwhile, Ukraine’s partnerships with Africa and India—highlighted at the 2024 Ukraine-Africa forum—could diversify trade and counter Russian influence.

Investment Implications

For investors, the risks are multifaceted:
1. Commodity Markets: Wheat prices are likely to remain volatile. Long positions in wheat futures or ETFs (e.g., DBA, JOE) may benefit from supply tightness, but geopolitical and weather shocks could amplify swings.
2. Agricultural Equities: Companies exposed to Ukrainian or Russian grain (e.g., AGCO Corp (AGCO), Deere (DE)) face operational risks but could see demand from food-insecure regions.
3. Geopolitical Plays: Defense contractors (e.g., Raytheon (RTX), Lockheed Martin (LMT)) may benefit from NATO’s Black Sea defense spending, while energy infrastructure firms (e.g., Transneft, Novatek) could see shifts in trade routes.

Conclusion

Ukraine’s grain exports in May 2025 underscore a fragile balance between resilience and vulnerability. With wheat exports down 14% year-on-year and corn shipments collapsing, the sector’s health hinges on resolving Black Sea corridor security, addressing climate impacts, and securing international financing.

The data is stark: a 13-year low in Ukrainian wheat production, $40 million in port damages from Russian attacks, and global wheat prices nearing crisis levels. Investors must monitor these trends closely, as the Black Sea’s stability will shape food security, geopolitical dynamics, and commodity markets for years to come.

The path forward requires sustained aid, infrastructure protection, and geopolitical diplomacy—failures in any of these could leave global markets exposed to even greater volatility.