The world is reeling from the lack of grain, Ukraine has 15 million tons of corn that cannot be exported, worse is ahead
Across Ukraine’s agricultural belt, warehouses hold up to 15 million tons of corn from the autumn harvest. Most of them should have been sold on the world market.
About half of the corn in storage that Ukraine is expected to export during the growing season is increasingly difficult to reach buyers. This shows that the Russian campaign has caused chaos in the global grain trade worth about $120 billion. Freight rates skyrocketed by supply chain bottlenecks and weather phenomena. Markets are bracing for greater volatility as shipments of goods from Ukraine and Russia – which account for about a quarter of the world’s grain trade – become increasingly complex and fuel fears of a scene. lack of food.
New trade, new deal
Before the Russian campaign, Ukrainian corn would be brought to Black Sea ports like Odesa and Mykolaiv by rail and loaded onto ships bound for Asia and Europe. But with ports closed, a small amount of corn is making a detour west by rail through Romania and Poland before being shipped out. One more important fact: the wheels on the wagons had to be changed at the border because, unlike European tracks, Ukrainian trains run on extant Soviet-era tracks.
Vice-president of the Ukrainian Agricultural Enterprise Club Kateryna Rybachenko said in an interview: “Railways are not designed to transport grain that way. This makes the whole logistics system very expensive and inefficient, and also very slow. Logically, that’s a big deal.”
Ukraine is one of the world’s largest exporters of corn, wheat and sunflower oil, and the flow of these commodities has largely stalled. The country’s agriculture ministry said grain exports are currently only 500,000 tons/month, down from 5 million tons before the war, causing $1.5 billion in losses. Crops from Russia – the world’s largest wheat exporter – continue to circulate. However, questions still remain about how to deliver and pay for future shipments that remain unanswered.
Disruptions in the flow of grains and oilseeds are sending prices soaring as they are staples for billions of people and animals around the world. Countries fearing potential food shortages are rushing to find alternative suppliers and new deals are emerging.
India is the country that formerly kept a huge wheat harvest in the country thanks to government-set prices. Now they are turning to export markets in record numbers across Asia. Brazil’s wheat exports in the first three months of the year far exceeded those of the whole of last year. U.S. corn shipments will arrive in Spain for the first time in about four years. And Egypt is considering exchanging fertilizer for grain from Romania and holding wheat talks with Argentina.
Those efforts may not be enough, said Dan Basse, president of agricultural market research firm AgResource.
“Today we can make some small changes. But if the conflict drags on into the summer, when wheat exports from the Black Sea usually increase, then the world will have problems. That’s when we will. began to see a shortage.” Mr. Basse said.
Export shuffling
Alternative suppliers come with more expensive freight, longer shipping times, or different quality, adding to food inflation. World supplies have been reeling from droughts in Canada and Brazil and shipping bottlenecks in many parts of the world. Examples range from the gridlock of the US rail system to trucker strikes across Spain.
The United Nations has warned food prices could rise by 22% as it is already at an all-time high. A dramatic drop in exports in the Black Sea could leave an additional 13.1 million people undernourished, increasing global hunger in a world still recovering from the effects of the pandemic.
Currently, many other providers are entering. Affected by rising prices, India has increased exports. This country is the second largest wheat grower after China. They could hit a record 8.5 million tonnes in the crop that ended last month.
The Indian ports of Kandla and Mundra in the state of Gujarat, west of the state of Gujarat, are the main gateways for wheat exports. These two ports have been active as sales have skyrocketed. The Indian government is making more railway lines to transport wheat. Meanwhile, port authorities have been asked to increase the number of berths and containers dedicated to grain. Several ports on the east coast of the Indian Ocean and Jawaharlal Nehru Port in Mumbai are also preparing to handle wheat cargo.
Indian Food and Commerce Minister Piyush Goyal said on Sunday. “We will continue to export wheat in bulk to meet demand in countries that are not receiving supplies from conflict zones. Our farmers are focused on increasing production.”
India’s commerce ministry said the country was in talks to gain access to the markets of Egypt, Turkey and China, three of the four largest importers, and other potential customers including Bosnia and Nigeria. and Iran. The Allana Group has been trading in agricultural commodities since 1865. Its director, Fauzan Alavi, said exports from the country could “easily” hit 12 million tonnes in the 2022-2023 crop year. beginning this month.
Brazil is a net importer of wheat. They are also expecting their highest grain exports in a decade. According to data from the Secretaria de Comercio Exterior, the country’s total wheat exports are expected to reach 2.1 million tons in the first three months of the year, almost double that of the whole of 2021. Importing countries include Turkey, South Africa and Sudan.
Australia is a major wheat exporter. Their sales are peaking, with deliveries having to be booked months in advance and more people buying their cereal than usual.
Some governments are restricting transactions to prevent food prices from rising. Serbia, the ninth largest supplier of corn, has temporarily banned exports. Argentina and Indonesia raise taxes on vegetable oil exports, and Kazakhstan will limit wheat shipments. The International Grains Council estimates that global grain trade, excluding rice, could fall by 12 million tonnes this season, the highest level in at least a decade.
“More frequently high prices not only lead to more exporters, but also to protectionism,” said Rabobank senior analyst Michael Magdovitz.
Meanwhile, importers are easing restrictions to get grain from more sources. Spain, Ukraine’s second largest corn importer, has eased regulations on pesticides to allow imports from Argentina and Brazil. It also received 145,000 tonnes from the US in March, its first shipment since 2018. China is another major customer for Ukraine, which has increased its purchases from the US.
General secretary of the European feed industry group FEFAC Alexander Doring said several feed mills in southern Italy have had to close because of grain shortages.
Feed prices in Europe skyrocketed after the war
North African and Middle Eastern importers are particularly dependent on Russian and Ukrainian supplies and are struggling with finding alternatives. Algeria, which opened its doors to Black Sea wheat last year, has returned to buying French goods. Egypt is the world’s largest wheat importer, with more than 80% of its imports coming from Russia and Ukraine over the past five years. The country is having to cut back on purchases as prices rise. This eliminated two direct import bids due to depleted stock and a price increase of around $100/ton, including freight. The Minister for Supply said that they are holding off further tenders until at least mid-May. The country is struggling to maintain a bread subsidy program used by some 70 million citizens.
With no sign that the supply crunch will ease any time soon, Rabobank forecast in March that wheat futures prices will average $2.30/kg or more by year-end and corn around 2.4. USD/kg or higher. That’s an increase of 30% or more from the end of 2021.
Farmers are struggling to get fertilizer for wheat plants sown in the fall as they germinate after a dormant period. Planting of key spring crops like corn and sunflowers will decline as producers face diesel shortages and stolen tractors.
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