Crop buyers cut off from Black Sea are turning to other origins

Major crop buyers across Asia are turning to alternative suppliers as attacks escalate in the Black Sea, crimping exports from the breadbasket region at a vital point in the season.


Ukraine and Russia have both stepped up attacks on each other’s ports and infrastructure in recent weeks. Ukraine’s grain exports in the first part of August slumped 75% from a year earlier, and Russian shipments this month are expected to be less than half the five-year average.


The region is one of the world’s top suppliers of grain and sunflower oil, much of which heads to Asia, Africa and the rest of Europe. With the shipping crisis deepening just as harvests roll in, importers are becoming increasingly uneasy. Higher prices from other origins are keeping some on the sidelines, but there are signs that several Asian buyers are starting to turn elsewhere for supply.

Indonesia, the world’s second-biggest wheat importer, recently picked up cargoes from Australia for September and October, according to people familiar with the matter. Other Southeast Asian nations have also booked Australian wheat for a similar period, and buyers in Bangladesh sought offers from Romania, some of them said, asking not to be identified as they weren’t authorized to speak to the media. Inquiries have also been made as far as North America.

Black Sea wheat is typically the cheapest at this time of year and dominates the global market. Plus, Australia remains at least a month from its next harvest. Ukraine and Russia together account for more than a quarter of global wheat exports, and the situation has pushed Chicago futures up about 15% since the end of June.

“This is unfolding precisely as the market enters its most important shipping window of the year,” BMI analysts said in a report last week. “The timing of the disruption is therefore especially consequential.”

Traders who have sold Ukrainian and Russian crop cargoes to Asia are also struggling to find ship owners willing to go to the war zone. Several have offered to fulfill contracts using grain originated from countries like Romania and Bulgaria instead, while some other contracts with less-flexible terms have had to be canceled under force majeure, people familiar with the matter said.

Three major Russian terminals at the port of Novorossiysk recently halted operations after a drone strike, and Ukraine said no ships have entered Ukraine’s Greater Odesa ports this month. Freight rates to receive August shipments from Ukraine to Indonesia reached nearly $90 per ton, up from about $70 a few weeks earlier, but charterers have struggled to secure vessels, according to shipbrokers.

Ships are also struggling to reach Russia’s Novorossiysk. Several signaling the port as their destination are idling empty in the Black Sea, far from the grain-export hub. One bulk carrier appeared to sail toward the hub before making a sharp turn southward, and is still waiting despite fixtures indicating that it needed to be at the port by Aug. 8.

Black Sea Attacks Shut Down Russia's, Ukraine's Export Hubs | The region is one of the world’s top grain and sunflower oil suppliers

“Now, it’s even more disruptive than the start of the war in Ukraine as we have various issues across the whole region,” said Bilal Muftuoglu, head of dry bulk research at Howe Robinson Partners.

India also has turned to palm, soy and canola oils to plug the gap left by delayed Black Sea sunflower oil shipments. Mannan Khan, director of Indian vegetable oil importer MK Agrotech Pvt. Ltd., said some of his sun-oil suppliers have started to cancel cargoes, forcing him to procure from the Baltics and Argentina instead.

In the US, reduced wheat production due to fewer plantings and drought means American cargoes are more expensive than elsewhere. The most recent US wheat export sales were the lowest in about a month. Futures jumped as much as 3% on Friday to $6.88 a bushel, the highest since July 24.

The impact on global food supplies will hinge on how long the conflict persists, and stockpiles are giving some buyers a buffer to wait out the crisis. The countries are also seeking workarounds, where possible. Ukraine’s state rail operator is looking to open new grain-export routes, and Russia’s Agriculture Minister held a recent meeting to discuss alternative routes.

Still, those outlets are unlikely to offset the volumes typically shipped from the Black Sea. If those ports remain shut, around 30 million tons of Ukraine’s agricultural exports will not reach the global market, according to Agriculture Minister Taras Vysotskyi.

“Wheat prices retain upside risk as the market may be underestimating the impact of export infrastructure disruptions in both Russia and Ukraine on global wheat availability,” said Vladimir Zinkovski, head of APAC crops research and analysis at S&P Global Energy.