World food supplies at risk as Russia withdraws from Black Sea deal

  • Wheat supply to Africa, M.East at risk if Russia retreats
  • Europe is facing a shortage of corn after Ukraine’s supply has declined
  • Australia is unlikely to help as delivery slots are booked until February
  • Palm prices jumped 4% due to Ukraine’s sunflower oil supply woes

SINGAPORE, October 31. (Reuters). Russia’s withdrawal from a UN-brokered Black Sea grain export deal over the weekend is likely to trigger shipments to import-dependent countries, deepening the global food crisis and pushing up prices.

Hundreds of thousands of tonnes of wheat on orders for delivery to Africa and the Middle East are at risk following Russia’s withdrawal, while Ukraine’s corn exports to Europe will drop, two Singapore-based traders said.

Russia on Saturday suspended its participation in a UN grain deal “indefinitely” after what it said were Ukrainian drone attacks on its Black Sea fleet in Crimea.

“If I need to change a ship that was supposed to come from Ukraine, what are the options? Really not much,” said one Singapore-based grain trader who supplies wheat to buyers in Asia and the Middle East.

Also Read :  New Fed research flags rising risk of U.S. recession

Chicago wheat futures jumped more than 5% on Monday and corn jumped more than 2% on supply fears.

Global wheat prices jumped to all-time highs earlier this year and corn hit a 10-year high as Russia’s invasion of Ukraine added to a rally sparked by bad weather and COVID-19 supply disruptions.

Australia, a major supplier of wheat to Asia, is unlikely to be able to fill the supply gap, with delivery slots booked until February, traders said.

Shares in Australia’s Graincorp ( GNC.AX ) rose more than 7% after seeing a five-fold increase in first-half profit due to supply constraints stemming from the Russia-Ukraine conflict.

No ships moved through the maritime humanitarian corridor established on Sunday. But the United Nations, Turkey and Ukraine have been working to implement the Black Sea Grains Agreement and on Monday agreed on a transit plan that would allow the 16 ships to move forward despite Russia’s withdrawal.

“We have to see how the situation will develop. It is not clear whether Ukraine will continue to deliver grain and what will happen to Russian exports,” said a grain trader based in Singapore.

Also Read :  On Snake Island, the rocky Black Sea outcrop that became a Ukraine war legend


Asian buyers ordering Ukrainian wheat cargoes include Indonesia, the world’s second-largest grain importer, although the region typically relies on Australia and North America.

Indonesian millers bought four cargoes, or about 200,000 tonnes, of Ukrainian wheat for November delivery under contracts signed in the past few weeks, traders said. Some Vietnamese feed mills that bought Ukrainian wheat are also likely to be affected.

Last week, Pakistan’s government agency bought about 385,000 tonnes of wheat in a tender, likely to come from Russia and Ukraine.

“We are not sure whether Russia will continue to export wheat or whether it will be safe for Russian wheat ships to ship from the Black Sea, even if Ukrainian exports remain blocked,” said a second Singapore-based trader at an international company.

It is likely that the export of Ukrainian corn to Europe registered in November will also suffer.

“As far as Europe is concerned, corn is a bigger issue than wheat, as Ukraine’s peak corn season arrives in November,” said a second trader.

Also Read :  Exclusive: Mexico's Pemex destroyed resources worth $342 million from two top fields

Russia’s decision is expected to support global vegetable oil prices as it threatens Ukrainian sunflower oil exports to key countries, including India, the largest importer of edible oil.

Malaysian palm oil futures jumped more than 4 percent on Monday.

Under the UN-brokered grain agreement, the Joint Coordination Center (JCC), made up of officials from the UN, Turkey, Russia and Ukraine, coordinates ship movements and inspects ships. Since July, more than 9.5 million tons have been exported from the Black Sea. tons of corn, wheat, sunflower products, barley, canola and soybeans.

While global agricultural commodity prices have reached record highs in recent months, domestic retail food prices remain high and are now rising even further.

“It usually takes about two months for higher grain prices to trickle down the supply chain and affect consumers at the retail level,” said the Sydney-based analyst.

“But food processors don’t have a lot of coverage going forward, so it’s likely to be much faster.”

Naveen Thukral reports; Edited by Tom Hogue

Our Standards: The Thomson Reuters Trust Principles.


Leave a Reply

Your email address will not be published.

Related Articles

Back to top button