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On June 6, the Nova Kakhovka dam in southern Ukraine, located about 70 km upstream of Kherson, a port city on the Dnipro River, collapsed, sending an uncontrollable flow of water from its reservoir downstream. Futures markets reacting to the news sent wheat futures up almost 3 percent before falling back later that day. 

The FAO Food Price Index declined by 2.6 percent in May. Compared to May 2022 levels, the Index is 22.1 percent below its all-time high.

Agricultural markets—particularly trade in cereals such as wheat and maize—have seen significant volatility over the past year as impacts of the Russia-Ukraine war, combined with tight global stocks, drove prices to record (nominal) highs. The rice market, by contrast, has been generally tranquil (Figure 1). Large global supplies and the lack of any direct trade connection to the Ukraine conflict left rice relatively immune to the price spikes seen with other commodities. But recently there have been signs of trouble.

Policies to boost biofuel production and use—crop subsidies, mandates, and other measures—came under intense scrutiny during the food price spikes of 2007/08, 2010/11, and 2012/13. As prices of maize, grains, oilseeds, and other feedstocks rose in those crises—more than doubling in some cases—critics pointed to their increasing use in biofuel production as a major factor behind high global food prices.

The Russia-Ukraine war has focused global attention on the key economic roles that those countries play as major exporters of agricultural commodities. Over 2019-2021, they accounted for 12% of global agricultural trade on a kilocalorie basis, with a combined market share of 34% for wheat, 26% for barley, 17% for maize, and 75% for sunflower oil. The war has scrambled this picture, with Ukraine’s exports falling dramatically, and Russia’s falling, then recovering.