Russia-Ukraine war disrupts wheat supplies: which countries are running out and where are they turning for supplies? | Today’s news

Global wheat buyers, who had been delaying purchases in the hope that supplies from the Black Sea would resume, now face a difficult choice: either replenish dwindling supplies at higher prices or wait for supplies from Russia and Ukraine to resume.

The Black Sea region was a vital source of wheat for importers in Asia, the Middle East and Africa. But attacks on vessels, ports and grain infrastructure since July have disrupted supplies from Russia and Ukraine, prompting major buyers to look elsewhere for supplies.

Russia and Ukraine account for more than a quarter of global wheat trade, according to Bloomberg, while Kpler estimates that their seaborne exports account for around 30% of global wheat exports. The disruption has already pushed benchmark Chicago wheat futures about 40% above their three-and-a-half-year lows in June, while wheat from alternative suppliers also rose.

What is happening in the Black Sea?

The Russo-Ukrainian war disrupted the movement of wheat from the Black Sea, and attacks hit ports, grain terminals, silos and vessels.

Russia’s wheat exports are on track to fall to about 1 million tonnes in September from 5 million tonnes a year earlier, while Ukraine is expected to ship about 1 million tonnes this month, half of last September’s level, according to Kpler estimates.

The disruption is particularly important because Russia and Ukraine together account for more than a quarter of global wheat trade. Their crops are an important source of supply for some of the world’s largest wheat-importing countries, including Egypt, Indonesia, Bangladesh and Vietnam.

Ukraine faces another problem. Its ports around Odessa, which normally handle about 90% of the country’s grain exports, have been repeatedly attacked. The country is therefore trying to move more grain through the Romanian port of Constanta, Danube ports, road networks and railways.

However, these routes cannot fully replace deep-sea shipments in the Black Sea.

According to ship tracking data compiled by Kpler and Bloomberg, a backlog of about 80 vessels, mostly smaller ships, has piled up around Ukraine’s Danube ports. Low water levels on the Danube have also complicated efforts to increase shipping through Romania.

Meanwhile, Russia is trying to transport grain through alternative routes including the Baltic and Caspian Seas, Kazakhstan and the Far East. However, these routes are more expensive and have limited capacity. For example, moving grain across the Far East requires additional thousands of kilometers of rail transport.

Read also | Wheat falls amid profit-taking, Black Sea War headlines

Which countries are most affected?

Egypt

Egypt, the world’s largest consumer of wheat, is among the countries most exposed to the disruption.

Wheat imports into Egypt fell to 143,870 tonnes in the first half of September from 876,139 tonnes a year earlier, according to official data. Russia and Ukraine had a large share in its transportation.

Egypt is now targeting France and other European suppliers. The country’s Minister of Supply, Sherif Farouk, said that Egypt is diversifying away from Russia and Ukraine.

Southeast Asia

Indonesia, the world’s No. 2 wheat importer, received only about 60,000 tons of wheat from the Black Sea this month, compared with about 500,000 tons in September last year, according to Kpler.

Indonesian millers are therefore looking towards Argentina and Australia. But Australian wheat costs around 20-25% more than the Black Sea costs they previously booked.

Some Southeast Asian millers responded by booking smaller shipments rather than commit to large bulk costs due to higher prices.

Vietnam faces a similar problem.

Bangladesh is also looking at Romania and Argentina while securing a small amount of wheat from India.

Read also | Wheat rises to highest level in three years as Black Sea crisis deepens

Where do buyers turn for wheat?

Australia has emerged as an important alternative for Asian buyers. Argentina is also attracting demand from Indonesia and Bangladesh.

European suppliers are also benefiting from the increased demand. Egypt turns to France and other European suppliers, while Libya uses the French port of Rouen for wheat shipments.

Other buyers are heading to Romania and Bulgaria. For example, Vietnamese golden wheat was able to convert two loads of Bulgarian wheat.

Some countries are also turning to India after New Delhi recently lifted its years-old ban on wheat exports.

The US is another alternative. Vietnam turned to American wheat to make up for missing Black Sea cargoes, although supplies came at a higher price.

However, the sudden increase in demand puts pressure on these alternative suppliers.

Is it easy to replace Russian and Ukrainian wheat?

The biggest problem is that the disruption occurs at a time when buyers have already depleted their stock.

Many importers have delayed alternative purchases in recent months as they hoped for a deal between Russia and Ukraine that would allow grain supplies to resume in the Black Sea.

This has left them scrambling for supplies as supplies dwindle.

Indonesian buyers are paying 20-25% more for Australian wheat than the prices at which they previously booked Black Sea cargoes.

Shipping adds another layer of cost. Russia’s alternative routes involve longer rail journeys and additional handling, while Ukraine’s road, rail and Danube routes cannot match the capacity of its deep-sea ports.

Competition for cargo is expected to intensify as importers return to the market with dwindling supplies. The Southern Hemisphere harvest will provide additional supplies later in the year, but buyers face a tighter market in the meantime.