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Russia Wheat Shipments Falter While Ukraine Ramps Up Exports

02 сентября 2022 года

Russia is struggling to export its record wheat crop, just as the opening of a safe corridor supports an uptick in shipments from the country it invaded just over six months ago.

Shipments from Russia in July and August, the first two months of the new season, fell 22% to 6.3 million tons from a year earlier, according to ship lineup data from Logistic OS. Last month, Ukraine restarted shipments, exporting 1.5 million tons of food through the grain corridors established under a deal brokered by the United Nations and Turkey.

While the cargoes from Ukraine’s Black Sea ports are little more than a quarter of pre-war volumes, the government hopes shipments will pick up in the coming months. By contrast, the slow pace of Russian wheat exports is adding pressure to global supplies as harvests elsewhere are hit by drought. Food was exempted from western sanctions, but bankers and insurers are cautious about doing business with Russia and shipping lines are wary of sending their vessels into a war zone.

“We have reputational risk or informal sanctions,” Dmitry Rylko, general director of Moscow-based institute IKAR, said in an interview. “They cause problems with finding vessels for Russia Black Sea, and we see some banks don’t want to open letters of credit for wheat of Russian origin.”

Since the start of the new season, Russian shipments are no longer constrained by an export quota that was in place for the second half of the previous season to protect domestic supplies. Now the government is complaining about restrictions on trade, even after the EU and US stressed that food is not targeted by sanctions.

“Despite the statements made by Washington and Brussels that anti-Russian sanctions do not apply to food and fertilizers, the blocking obstacles to bank settlements, insurance and transportation of goods that have arisen as a result of their introduction still remain,” Russia’s foreign ministry said last week.

Russian farmers are also reluctant to sell wheat as a strong ruble and high export tax make it less attractive, while IKAR said some European customers weighted their orders to earlier in the year.

Ukraine Rebound

Russia and Ukraine signed a deal in July to release millions of tons stuck in Black Sea ports. The first cargoes were carried by vessels trapped in Odesa and two other Black Sea ports, while another 1.15 million tons of grain was shipped by rail in the first 23 days of August, according to Ukragroconsult.

Still, it remains to be seen whether shipments can be accelerated further as Ukrainian forces mount a counter-offensive in the south of the country. Before the war, 5 to 6 million tons of grain were typically dispatched monthly via its Black Sea ports.

The United Nations, which brokered the deal to end the logjam at Ukrainian ports, has emphasized the importance of Russian fertilizers and agricultural commodities making it to customers.

Russian exports are starting to speed up slightly, something that’s essential to the global wheat market, according to Agritel. IKAR expects shipments to rise to 4 million tons in September, though that would still be behind the 4.7 million tons exported a year earlier.

“The wheat production of the five major exporters outside the Black Sea is barely progressing compared to last year,” Agritel analyst Nathan Cordier said at a briefing on Tuesday. “It will not allow them to cover a failure of Ukraine or Russia.”

Source: Bloomberg  |  #grain   |  Comments: 0   Views: 2

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