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

  • Wheat supply to Africa, M.East at risk after Russia withdraws
  • Europe is facing corn shortages due to the arrival of supplies from Ukraine
  • Australia is unlikely to help as shipping slots were booked until February
  • Palm prices rise 4% on Ukraine’s sunflower oil supply problems

SINGAPORE, Oct 31 (Reuters) – Russia’s weekend backtracking on a U.N. deal to export Black Sea grains is likely to hit shipments to import-dependent countries, deepening a crisis world food and causing gains in prices.

Hundreds of thousands of tonnes of wheat earmarked for delivery to Africa and the Middle East are at risk after Russia’s withdrawal, while Ukraine’s corn exports to Europe will be cut, two traders said based in Singapore.

Russia on Saturday suspended participation in the UN grain deal for an “indefinite period” after what it said was a major Ukrainian drone attack on its Black Sea fleet in Crimea.

“If I have to replace a ship that was supposed to come from Ukraine, what options are there? Not much really,” said a Singapore-based grain trader who supplies wheat to buyers in Asia and the Middle East.

Also Read :  North Korea fires ICBM into sea off Japan, according to South Korean officials

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

Earlier this year, global wheat prices jumped to a record high and corn hit a 10-year high as Russia’s invasion of Ukraine added fuel to a rally triggered by adverse weather and COVID-19 supply disruptions.

Australia, a key wheat supplier to Asia, is unlikely to be able to fill any supply gaps, with shipping slots booked until February, traders said.

Shares in Australia’s Graincorp ( GNC.AX ) – which quintupled first-half profit due to supply constraints stemming from the conflict between Russia and Ukraine – rose more than 7%.

No ships moved through the established humanitarian maritime corridor on Sunday. The United Nations, Turkey and Ukraine, however, moved forward to implement the Black Sea grain deal and agreed on a transit plan by Monday for 16 ships to move forward, despite Russia’s withdrawal.

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

Also Read :  Political and human rights criticism grows louder as World Cup nears in Qatar

Wheat, corn and vegetables

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

In recent deals, Indonesian millers bought four cargoes or about 200,000 tonnes of Ukrainian wheat for shipment in November in deals signed in recent weeks, traders said. Some Vietnamese feed mills that bought Ukrainian wheat are also likely to suffer.

Last week, a government agency in Pakistan bought about 385,000 tonnes of wheat in a tender that was 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 ships carrying Russian wheat to be sent from the Black Sea even if Ukrainian exports remain blocked,” said a second Singapore-based trader from an international company.

Ukraine’s corn exports to Europe scheduled for November will also be affected.

“As far as Europe is concerned, corn is a bigger issue than wheat as we are entering the peak Ukrainian corn season in November,” the second trader said.

Also Read :  Biden comments on coal-fired plants slammed by Manchin ahead of U.S. midterms

Russia’s decision is expected to support global vegetable oil prices as it threatens Ukraine’s sunflower oil exports to key destinations, including India, the main edible oil importer .

Malaysian palm oil futures rose more than 4% on Monday.

Under the UN-negotiated grain deal, a Joint Coordination Center (JCC) made up of UN, Turkish, Russian and Ukrainian officials agrees on ship movements and inspects ships. More than 9.5 million tons of corn, wheat, sunflower products, barley, rapeseed and soybeans have been exported since July.

Although global agricultural commodity prices have fallen to record highs in recent months, local retail food prices remain high and now face further increases.

“Typically, it takes about two months for higher grain prices to filter through the supply chain and affect consumers at the retail level,” a Sydney analyst said.

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

Reporting by Naveen Thukral; 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