Black Sea export disruptions push wheat prices up
Persistent shipping problems in the Black Sea are beginning to change global wheat trade. Buyers who traditionally depended on supplies from Ukraine and Russia are increasingly forced to look for grain in other regions, where its delivery is more expensive.
According to Reuters, restrictions on Black Sea supplies have already affected global prices: wheat futures in Chicago rose by about 40% from June lows and reached their highest levels in three and a half years.
The problem for the world market lies in the scale of the Black Sea route. According to Kpler, Ukrainian and Russian seaports together account for about 30% of global wheat exports.
In Ukraine, after attacks and increased war risks, shipments through the major ports of Odesa, Chornomorsk, and Pivdennyi are significantly limited. Some cargo can be redirected to Reni and Izmail, but the Danube ports, due to their technical characteristics and vessel restrictions, cannot fully replace the deep-water terminals.
Similar problems emerged with Russian exports. After the strike on the Taman terminal and restrictions in the Kerch Strait area, the main load fell on Novorossiysk and Tuapse. Kpler estimates Russia's available export capacity without port Kavkaz at about 2-2.5 million tons per month.
Until recently, many importers were reluctant to completely replace Black Sea grain, using accumulated reserves. The reason: alternative supplies from Australia, Argentina, and Western Europe are more expensive for many markets.
However, the gradual reduction of stocks increases the need for new purchases. The countries most sensitive to the situation remain those in North Africa, the Middle East, and Asia, which traditionally purchase significant volumes of Ukrainian and Russian wheat.
Changes in trade flows are already noticeable in North Africa. According to Fastmarkets, French wheat has become more competitive for Egypt and Sudan due to higher transportation and insurance costs for cargo from the Black Sea.
At the end of August, Fastmarkets estimated freight from Russian Black Sea ports to Egypt at about $60 per ton. High transport costs reduced the advantage of cheaper Russian grain over French after accounting for full delivery costs.
Against this background, traders were already preparing about 60 thousand tons of French wheat for shipment to Egypt. Another cargo was heading to Sudan – a market where French grain has been virtually absent for many years.
Thus, the main factor for buyers is no longer only the price of grain at the loading port, but also the ability to guarantee receiving the cargo, insurance costs, and vessel availability. If restrictions in the Black Sea persist, more demand may shift to the EU, Australia, Argentina, and Canada, increasing competition for available volumes.
For Ukraine, prolonged problems with sea exports simultaneously mean accumulation of grain inside the country and pressure on domestic prices. Kpler estimated Ukraine's stocks of the new harvest at more than 6 million tons, while alternative export capacities through neighboring countries remain limited.
Based on materials: Reuters, Kpler, Fastmarkets
