With the full-scale Russian invasion of Ukraine underway, Rabobank predicts a loss of access to the Black Sea it says will strain global wheat exports.
The Black Sea region accounts for 34 per cent of all global wheat exports and the loss of operations has not occurred for more than 100 years. The last time the world lost access to all Black Sea wheat exports was during World War 1, in 1914.
Rabobank says exports may halt for the short term as blockages to shipping routes and a lack of insurance cover available to shipping lines results from the war.
This is bad news for the global grain and oilseeds market, especially wheat exports which will be drastically affected according to a banking specialist from Rabobank. However, Australian wheat exports will see an increase in demand if the Black Sea exports are unavailable.
Reuters reported Friday that Ukraine is a major exporter of corn (maize), much of it destined for China and the EU. It also competes with Russia to supply wheat to major buyers such as Egypt and Turkey.
Industry estimates currently put Ukraine’s grain exports at about 5 million to 6 million tonnes a month, comprising about 4.5 million tonnes are corn, 1 million tonnes of wheat and a remaining share of mainly barley.
Main grain export ports include Chornomorsk, Mikolayiv, Odessa, Kherson and Yuzhny.
Rabobank said the local Kwinana Free-In-Store APW prices could rise from $367/tonne currently to $425/tonne in the near term. If sanctions are imposed by Russian wheat exports, prices could rise significantly.
Approximately 160 million metric tonnes of the world’s wheat (20 per cent) is used for feed. Governments in certain large export nations such as China and Iran could ignore western sanctions on Russian exports and procure grain via the Turkish Straits, which will be the only passageway available between the Black Sea and the Mediterranean.
The disruptions can also affect canola and barley markets with Ukraine being the third-largest importer of canola after Australia and Canada. The crisis will also put pressure on global corn prices with 15 million metric tonnes of Ukrainian corn will still be left unexported this season.