World food supplies at risk as Russia withdraws from Black Sea deal

  • Wheat to Africa, Middle East is in danger after the return of Russia
  • Europe is facing a shortage of corn as supplies from Ukraine have been affected
  • Australia is likely to help as shipping slots are booked until February
  • The price of dates rose by 4% due to problems with the supply of sunflower oil in Ukraine

SINGAPORE, Oct 31 (Reuters) – Russia’s withdrawal from a U.N.-brokered deal on Black Sea grain exports is likely to hit shipments to import-dependent countries, deepening the global food crisis and pushing up prices.

Two Singapore-based traders said hundreds of thousands of tonnes of wheat ordered for shipment to Africa and the Middle East are at risk after Russia’s withdrawal, while Ukraine’s corn exports to Europe will drop.

On Saturday, Russia suspended participation in the UN grain deal “indefinitely” after what it said was a major Ukrainian drone attack on its Black Sea fleet in Crimea.

“If I have to replace a container that was supposed to come from Ukraine, what are the options? Not many at all,” said a grain trader from Singapore who supplies wheat to buyers in Asia and the Middle East.

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Chicago wheat futures rose more than 5% on Monday and corn rose more than 2% on supply fears.

Reuters graphic

Earlier this year, global wheat prices hit record highs and corn hit a 10-year high as Russia’s invasion of Ukraine added fuel to a rally triggered by bad weather and COVID-19 supply disruptions.

Traders said Australia, a key supplier of wheat to Asia, was unlikely to fill any supply gaps as delivery slots were booked through February.

Shares in Australia’s Graincorp ( GNC.AX ), which reported a five-fold increase in first-half earnings due to supply constraints stemming from the conflict between Russia and Ukraine, rose more than 7%.

On Sunday, no ships moved through the designated humanitarian maritime corridor. But the United Nations, Turkey and Ukraine have pushed to implement the Black Sea Grain Agreement, agreeing on a transit plan on Monday that would allow 16 ships to move forward despite Russia’s withdrawal.

“We have to see how the situation develops. It is not clear whether Ukraine will continue to deliver grain or not, and what will happen to Russian exports,” said a Singapore-based grain trader.

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Reuters graphic

Wheat, corn and vegetables

Asian buyers ordering Ukrainian wheat shipments include Indonesia, the world’s second-largest grain importer, although the region typically relies on Australia and North America.

Traders said that in recent deals, Indonesian exporters bought four loads or about 200,000 tons of Ukrainian wheat for November delivery in contracts signed in the past few weeks. Some Vietnamese food factories, which bought Ukrainian wheat, may also have been damaged.

Last week, a Pakistani government agency bought about 385,000 tons of wheat in a tender, probably from Russia and Ukraine.

“We are not sure whether Russia will continue to export wheat or whether it will be safe for ships carrying Russian wheat to move through the Black Sea, even while Ukrainian exports remain blocked,” said a second Singapore-based trader at an international firm.

Ukraine’s corn exports to Europe, which were ordered for November, are also likely to be affected.

“As far as Europe is concerned, corn is a bigger issue than wheat as we enter Ukraine’s peak corn season in November,” said a second trader.

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Russia’s decision is expected to support global vegetable oil prices as it threatens Ukraine’s sunflower oil exports to key destinations, including major edible oil importer India.

Malaysian palm oil futures rose more than 4% on Monday.

Under the United Nations-brokered grain deal, the Joint Coordination Center (JCC), made up of UN agencies, Turkey, Russia and Ukraine, agrees on vessel movements and monitors the vessels. Since July, more than 9.5 million tons of corn, wheat, sunflower products, barley, rape and soybeans have been sent from the Black Sea.

Although global agricultural prices have reached record highs in recent months, local retail food prices remain high and are now facing further increases.

“Typically, it takes about two months for higher grain prices to filter through the supply chain and affect consumers at the retail level,” the Sydney analyst said.

“But food processors don’t have advanced coverage, so it’s likely to happen much sooner.”

Reporting by Navin Thukral; Edited by Tom Hogg

Our Standards: The Thomson Reuters Trust Principles.

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