Wheat price (cents per bushel) on the Chicago Mercantile Exchange (CME) at 1 week intervals
The escalation of the conflict between Russia and Ukraine threatens to result in a rise in food prices on a global scale. Russia has closed the Kerch Strait, which connects the Black Sea with the Azov Sea, to warships, and if such a restriction affects commercial ships, it will become a serious problem for Ukraine, said Denis Voznesensky, Sydney grain and oilseeds analyst at Rabobank.
There are two Ukrainian ports on Azov: Miriupol and Berdyansk, which account for about 5% of Ukraine’s total grain export capacity. However, the greater risk is that the conflict could spill over to other regions of Ukraine, including the southwest, where the country’s main export terminals are located, the expert notes. In this case, the consequences of the conflict will become global.
According to Rabobank, Ukraine’s share in world exports of wheat and barley is 10% and 16%, respectively. Therefore, possible supply disruptions will lead to further increases in world food prices, fueled by reduced supply due to poor weather and stronger demand from China.
If the escalation of the conflict between Moscow and Kiev entails the imposition of additional sanctions on Russia, which is the world’s leading exporter of wheat, this will strongly spur global food inflation, Voznesensky predicts.
“Perhaps this year the Black Swan will be a war (between Russia and Ukraine – approx. ProFinance.ru),” says Nick Orsich, vice president of StoneX ($ 1 billion under management) for the agricultural sector. due to the rise in prices for agricultural products, and this is noticeable in the volatility. “
Wheat prices in the region are growing along with world benchmarks: over the past two weeks, July futures for Black Sea wheat (traded on CME – approx. ProFinance.ru) have grown by about 10%, and a similar Chicago benchmark – by 8%.
Australia is closely following the development of the situation and plans to become the world’s leading exporter of barley and wheat this season, writes Denis Voznesensky. According to him, Ukrainian wheat competes with Australian wheat in the markets of Indonesia, Bangladesh, Thailand, the Philippines and South Korea.
“If the situation with the Kerch Strait disrupts the export of wheat, then its transportation to the nearest accessible port will cost an additional $ 26.40 per tonne (trucking) or $ 15.80 per tonne (railroad). This will lead to further price increases, ”the expert predicts.