Grains: EU market on edge
October 14, 2022 at 11:28 AM ,
Der AUDITOR
Divided opinions
With the grain deal negotiated between the UN, Turkey, Ukraine and Russia about to expire on 20 November Russia has seized the opportunity to put forward new demands. As news agencies report the country has sent the UN a letter demanding better opportunities for Russia to export its own grain and fertilisers. These demands and Russia’s postures in recent weeks come at a sensitive time as Russia is retreating in the eastern and southern parts of the Ukraine whilst retaliating with brutal missile strikes after an explosion partly destroyed a bridge connecting Russia with occupied Crimea.
Opinions are divided over the chances of an extension. Although Russia has falsely claimed that most grain shipments are destinated to rich EU countries, the deal has proven a success. As many as 331 vessels carrying more than 7 million mt of grains and other foodstuffs have left Ukrainian ports as of 13 October according to the Black Sea Grain Initiative Joint Coordination Centre. The UN has also been keen to emphasise that there are incentives for Ukraine and Russia to extend the deal.
Ukrainian officials and traders are, however, far less optimistic. As the success of the grain exports have rebuilt a lifeline for Kyiv fears have been mounting in Ukraine that Russia will weaponize food. Foreign Minister Dmytro Kuleba recently stated in a tweet that the letter sent to the UN has confirmed these fears. Traders in general reckon that Russia has no interest in extending the deal and are reluctant to ship grain over the Black Sea route in November. The recent backlog in ships waiting to be inspected has added fuel to fire and the Financial Times reports that a record 120 vessels were waiting to travel to and from Ukrainian ports at the end of last week as there are not enough inspectors to handle the upsurge and some crews are simply unprepared. According to grain research firm SovEcon ships presently have to wait 10 to 15 days to be inspected in Istanbul and pricing agency Agricensus states that freight rates have risen by nearly 10% in the Black Sea in recent days.
Opposite impact on EU wheat and corn
The EU has certainly ramped up its wheat and corn imports as official figures shows. EU wheat imports have risen by 114% since the start of the season as compared with the same period last year. The bloc has imported 1.493 million mt of wheat. Ukraine supplied more than 50% of this volume (730,799 mt), followed by UK (285,386 mt) and Canada (145,690 mt). EU corn imports have also more than doubled on last year to 7.88 million mt. Brazil is the leading supplier (4.43 million mt), followed by Ukraine (2.87 million mt). As the EU largely depends on Ukraine the market is growing increasingly edgy over recent developments. Curiously, these are having the opposite impact on wheat and corn. While Russia’s brutal retaliation has driven up wheat prices, the backlog in Ukrainian ports has added pressure to the corn market. Matif quotations have, however, risen for both commodities.
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EU bread wheat (12/220/76) |
||
|
Destination |
EUR/mt |
Diff. EUR/mt |
|
Rouen, France, FOB |
353 |
1 |
|
Hamburg, Germany, delivered* |
368 |
15 |
|
Rhineland, Germany, delivered |
365 |
13 |
|
Upper Rhine, France & Germany, FOB |
347 |
0 |
|
EU grain maize, yellow, 98% purity |
||
|
Destination |
EUR/mt |
Diff. EUR/mt |
|
Bordeaux, France, FOB |
348 |
-4 |
|
South Holland, CIF |
350 |
1 |
|
Brake, Northern Germany, FCA* |
346 |
2 |
|
Upper Rhine, France & Germany, FOB |
335 |
-2 |
|
Trade sources, weekly comparison |
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View more
- price chart, corn, yellow, 99.5% purity, Matif
- price chart, milling wheat, Matif
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