World Bank says Ukraine war may prompt grain shortages in poor countries

Ears of wheat are seen in a field near the village of Hrebeni in Kyiv region, Ukraine July 17, 2020. Picture taken July 17, 2020. REUTERS/Valentyn Ogirenko/File Photo

WASHINGTON, March 16 (Reuters) - The World Bank on Wednesday said a number of developing countries face near-term wheat supply shortages due to their high dependence on Ukrainian wheat exports that have been disrupted by Russia's invasion.

The World Bank said in its latest Trade Watch report that Gambia, Lebanon, Moldova, Djibouti, Libya, Tunisia and Pakistan are the most exposed to the disruptions of wheat exports from Ukraine, which make up roughly 40% or more of their wheat imports.

"These importers will have trouble quickly switching to alternative sources, possibly leading to supply shortages in the short run," the World Bank said.

The grain supply situation has been worsened by Russia's imposition of export curbs on wheat and other cereal grains to countries outside of fellow Eurasian Economic Union members Armenia, Belarus, Kazakhstan and Kyrgyzstan.

Russia was the top wheat exporter in 2018 and Ukraine the fifth largest, according to World Bank data. The two countries together make up about a quarter of world exports.

Western sanctions on Russia over its invasion of Ukraine do not specifically target Russian grain exports, but sanctions that prohibit dollar and euro transactions with top Russian banks make trade finance more difficult.

Aside from the direct supply shortages to Ukraine's biggest grain customers, higher market prices for wheat will affect middle-income countries across the globe, the World Bank report said.

The United Nations Food and Agricultural Organization's Cereal Price Index in February was up 14.8% from a year earlier, and the World Bank said wheat futures prices had surged 60% since the start of the conflict.

"Moreover, disruptions to exports of wheat will affect markets for corn and rice, which are wheat substitutes, benefiting net exporters and harming net importers of those products," the bank added.

Disruptions caused by the war in Ukraine also could challenge a strong global trade recovery in 2021, with goods and services trade now exceeding pre-pandemic levels, the World Bank said.

Overall trade in 2021 surged by 26% over 2020 levels and by 17% over 2019 levels, with trade values exceeding 2019 levels in all regions, except for transportation equipment, the World Bank said.

Reporting by David Lawder; editing by Jonathan Oatis

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