Grain prices keep increasing after Russia's invasion of Ukraine

The average purchase prices for grain have gone up by 20-35 percent in Poland since the beginning of Russia's invasion of Ukraine on February 24, Pekao Bank analysts have written in a report.

According to the analysts, an increase in domestic demand for cereal products, which has resulted from the flow of refugees from Ukraine into Poland, will keep grain prices high in the coming months.

Russia and Ukraine are two of the world's biggest exporters of grain, oilseed crops and feed components. Their share in global exports of sunflower oil stands at around 75 percent, and of wheat and barley at nearly 30 percent.

Russia has also been the world's biggest exporter of fertilisers.

In the opinion of the authors of the report, the war in Ukraine will have a negative impact on global vegetable supplies.

Shortly after the outbreak of the war in Ukraine, forecasts regarding global exports of grain and oil seed crops were downgraded by 2-5 percent.

"Ukraine's Agriculture Ministry has announced that, as far as the next season is concerned, the sown area will be reduced by 20-30 percent year on year," Pekao Bank analysts wrote, adding that, according to the Food and Agriculture Organisation (FAO), Ukraine's wheat production will decrease by 13 percent year on year in 2022.

The report stated that Poland was self-sufficient when it came to grain production.

"But domestic supply has been strongly affected by the situation on the global market and prices offered to Polish exporters," they wrote, adding that the coming months could further increase pressure on the Polish home market.

"Polish grain producers have been limiting supplies to the domestic market as they have been waiting for a further growth of global prices," they concluded.