Black Sea wheat prices remain volatile amid concerns over tensions in region

Volatility in Black Sea wheat prices has continued in recent days due to the ongoing tensions in the region, with export prices of wheat from Ukraine and Russia both having risen, traders said.

According to S&P Global Platts assessments, on Feb. 22 prices of 12.5% protein Russian wheat were at $312/mt, while 11.5% protein Ukrainian wheat prices were at $306/mt, both up $3 day on day.

Russia has deployed troops into breakaway sections of eastern Ukraine this week on a “peacekeeping mission”. Meanwhile, Ukraine has also called up reservists to conscript its own forces.

The rising tensions in the region, a major wheat exporter, has created volatility in global wheat markets and concerns have emerged over likely disruption to trade flows, traders added.

Russia and Ukraine’s combined wheat exports for the 2021-22 marketing year are estimated to account for 23% of the global total of 206.9 million mt, according to the US Department of Agriculture.

According to traders, demand for wheat remained weak in the Black Sea region amid the tensions, while buyers are inquiring about the food grain from alternative origins, like Romania and Germany.

“Buying interest remained very limited after the escalation of tensions. Although the weather conditions are favorable in key producing region in both countries,” a trader based in Kyiv said.

However, so far market participants have not reported any concerns over navigation, traders said.

Since the beginning of the marketing year 2021-22 (June-July), Ukraine has seen a promising wheat export campaign, while Russia has seen a drop in its wheat shipments.

During June 1 to Feb. 21, Ukraine exported 17.8 million mt, up 34% on the year, according to data released by its agriculture ministry. Ukraine shipped out 16.6 million mt of wheat in MY 2020-21.

However, since tensions emerged in the region, Ukraine’s pace of exports has declined. In January, the average weekly exports declined to around 200,000 mt from the weekly average of nearly 400,000 mt in December.

Russia had started to gather troops since late December along Ukraine’s border leading to uncertainties in the region and hitting trade prospects of Black Sea wheat, according to market sources.

On the other hand, Russia has seen a poor export campaign so far in MY 2021-22 due to a decline in domestic output and repeated government regulations limiting exports.

Between June 1 and Feb. 17, Russia had shipped out 25.2 million mt, 24% lower over the year, data from the Russian Federal Service for Veterinary and Phytosanitary Surveillance showed.

With the tensions escalating in the region, traders believe that the pace of wheat exports from Ukraine are seen to remain slow in the coming weeks. For Russia, too, the momentum of shipments is seen to remain poor as buyers are uncertain about the trade prospects in the region, they added.

S&P Global Platts

Tags: Ukraine, Russia, export, prices, wheat, Black Sea, volatility