SINGAPORE—Russia’s withdrawal over the weekend from a UN-brokered Black Sea grain export deal could hurt shipments to import-dependent countries, exacerbate global food crisis and spur higher prices is high.
Hundreds of thousands of tonnes of wheat reserved for Africa and the Middle East are at risk following Russia’s withdrawal, according to two Singapore-based traders, and Ukrainian maize exports to Europe are at risk. said it would decrease.
Russia on Saturday “indefinitely” suspended its participation in the UN grain deal following a massive attack by Ukrainian drones on the Black Sea Fleet in Crimea.
“What are your options if you have to replace a ship that was supposed to come from Ukraine?” said a Singapore-based grain trader who supplies wheat to buyers in Asia and the Middle East.
Wheat futures in Chicago rose more than 5% on Monday, while corn rose more than 2% on supply concerns.
Earlier this year, global wheat prices hit an all-time high and corn hit a decade high. That’s because the Ukrainian conflict has spurred a rise caused by bad weather and his COVID-19 supply disruptions.
Australia, a major supplier of wheat to Asia, is unlikely to be able to close the supply gap with quotas reserved until February, traders said.
Shares of Australia’s Graincorp, whose first-half earnings jumped five-fold on supply constraints caused by the conflict between Russia and Ukraine, rose more than 7%.
No ships passed through the established maritime humanitarian corridor on Sunday. But the United Nations, Turkey and Ukraine have pushed for implementation of the Black Sea grain deal despite Russia’s withdrawal, agreeing a transit plan on Monday for 16 ships to move forward.
“We’ll have to see how the situation unfolds. It’s not clear if Ukraine will continue to ship grain and what will happen to Russian exports,” said the Singapore-based grain trader. said.
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Asian buyers booking Ukrainian wheat shipments include Indonesia, the world’s second largest grain importer, but the region typically relies on Australia and North America.
In a recent deal, an Indonesian miller bought four cargoes or about 200,000 tonnes of Ukrainian wheat for a November shipment in a deal signed in the past few weeks, traders said. Some of the Vietnamese feed mills that bought Ukrainian wheat are also likely to be hit.
Last week, Pakistani government agencies bought about 385,000 tonnes of wheat at tender, likely sourced from Russia and Ukraine.
“We are not sure whether Russia will continue to export wheat or whether ships carrying Russian wheat can safely ship out of the Black Sea, even if exports from Ukraine remain blocked,” said Singapore. said a trader at another international firm based in
Ukraine’s corn exports to Europe, which were booked for November, are likely to be hit as well.
A second trader said, “Maize is a bigger problem than wheat for Europe as we enter the peak Ukrainian maize season in November.”
Russia’s decision is expected to support global vegetable oil prices as it threatens Ukrainian sunflower oil exports to key destinations, including India, the largest edible oil importer.
Malaysian palm oil futures rose more than 4% on Monday.
Under the United Nations-brokered grain trade, the Joint Coordinating Center (JCC), comprising officials from the United Nations, Turkey, Russia and Ukraine, agrees to move the vessels and inspects them. Since July, more than 9.5 million tons of corn, wheat, sunflower products, barley, rapeseed and soybeans have been exported from the Black Sea.
While global agricultural prices hit record highs in recent months, local retail food prices remain high and are now rising further.
“Normally, it takes about two months for a grain price hike to make its way through the supply chain and impact consumers at the retail level,” said the Sydney-based analyst.
“But the food processor doesn’t cover much forward, so it can be much faster.”