Wheat Prices Soar as Russian and Ukrainian Grain Exports Plummet
Once again, shipping disruption from the conflict in the Black Sea is driving up wheat prices - and this time, both of the region's big grain exporters are suffering supply-chain hits.
Since the start of the month, wheat futures on the benchmark Chicago exchange have risen 18 percent, reaching the highest levels in three years. Like the last time that prices reached this level, the surge is linked to disruption in Black Sea shipping.
There is no sign that prices will turn around soon. Both Russia and Ukraine have been pounding each others' merchant shipping, damaging dozens of bulkers and effectively shutting down loading. On the Ukrainian side, about 70 ships are currently waiting off the entrance to the Sulina Canal, the transit route into the northernmost branch of the Danube river delta. The logistical difficulties have reduced Ukrainian grain exports by 80 percent in August, according to the country's agriculture ministry. The timing is unfortunate, as harvest season is under way.
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On the Russian side, the impact is less clear. Kremlin spokesman Dmitry Peskov told reporters this week that "measures have been identified and will be further developed, ensuring that all grain intended for export is shipped on time and in full." But Russian media network Interfax reports that wheat exports are down 2.6-fold year-over-year, due in part to shipping disruption and in part to physical damage at Russian grain terminals. Trade journal World Grain reports that all three of the grain terminals at Novorossiysk have shut down due to Ukrainian drone attacks.
Elena Tyurina, head of the analytical department at the Russian Grain Union, told Interfax that at the current rate of decline, this season's Russian wheat exports could be the lowest in ten years - despite solid harvest numbers. Her colleague Arkady Zlochevskiy, the president of the Union, warned of catastrophic losses for Russian wheat farmers: grain with nowhere to go is getting sold for feed at a price about $45 a tonne below the cost of production.
