Grain corridor closure would affect crop prices

Russia is pulling out of the Black Sea Grain Initiative and that could have a profound impact on three crops Canadian farmers grow, says an analyst.

A total of 32.9 million tonnes of Ukrainian grain have flowed to markets around the world through the United Nations brokered deal, including nine million tonnes of wheat and one million tonnes of canola.

MarketsFarm analyst Bruce Burnett said there is still plenty of uncertainty about how Russia’s refusal to extend the deal that expired on July 17 will affect Ukraine’s shipments.

The lack of an agreement does not preclude Ukraine from shipping grain out of its ports in Odesa, Chornomorsk and Yuzhny/Pivdennyi.

It depends on what actions Russia takes to prevent the loading of vessels and whether vessel insurance rates rise to prohibitive levels.

“It probably does mean that Ukrainian exports are going to be restricted,” he said.

“It is going to create a backlog of Ukrainian grain if they can’t (ship).”

Ukraine doesn’t have any other export options at the moment.

The European Union has banned imports of Ukrainian wheat, corn, rapeseed and sunflower to Bulgaria, Hungary, Poland, Romania and Slovakia through Sept. 15.

Burnett said Ukraine’s export woes will have a direct or indirect impact on Canada’s wheat, canola and yellow pea prices. He thinks the biggest affect will be on canola and peas.

“I say that only because of the fact that our wheat does not compete in a lot of markets where Ukrainian wheat is delivered,” he said.

But Ukraine’s export restrictions have already buoyed global wheat prices, which in turn should help elevate Canadian wheat values.

Ukraine was already set to harvest and export another small pea crop in 2023.

The country harvested 310,000 acres of peas in 2022, a 48 percent decline from the previous year.

The harvested area could be similar in 2023 based on the latest government seeded acreage data showing growers planted 343,000 acres of the crop.

UkrAgroConsult said farmers are adapting to working under the risks of war. It is forecasting an increase in average pea yields in 2023 because of the increased application of fertilizer and crop protection products.

“Weather also looks rather positive to the legume production,” the agriculture consultancy firm said in a recent article.

“Despite the lack of rainfall in May, when the pea crop needed moisture in the upper soil layers, the peas deterioration was not irreversible as cool weather prevailed, preventing extra evaporation.”

UkrAgroConsult is forecasting a total pulse harvest of 390,000 tonnes, up from 334,000 tonnes last year, which was about half of the previous year’s volume.

Most of that production will be yellow peas because the country produces very little beans, lentils and chickpeas.

Total plantings of those three crops amounted to 105,963 acres in 2022.

UkrAgroConsult said it is not easy to ship pulses from Ukraine to markets around the world.

“Not all importers are willing to take the risks associated with imports from Ukraine: long waiting times for entry and exit from Odessa, limited transshipment capacity of Danube ports, lengthened logistics via EU countries and ever-present military risks,” the firm stated in the article.

It is forecasting that total pulse exports from the country will not exceed last year’s levels of 250,000 tonnes.

Stat Publishing reports that Ukraine exported 169,748 tonnes of peas in 2022, half of the volume of the previous year.

Burnett said predicting what will happen with the Black Sea Grain Initiative going forward is a fool’s game.

Russia could decide to re-enter the pact next week, or it could take years for that to happen.

There has been intense international pressure for Russia to extend the deal because much of Ukraine’s exports end up in markets in Africa and the Middle East where the food is desperately needed.

Tags: chickpeas, Chornomorsk, Russia, shipments, exports, deal, grain, United Nations, lentils, markets, canola, Odesa, prices, Black Sea Grain Initiative, Canada, Pivdennyi, crops, yellow pea, wheat