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Tridge Analysis

Unblocking of ports and Positive Expectations of Wheat Harvest in Season 2021/22 in Ukraine Impacts Global Trade

Updated Aug 4, 2022
Based on recent estimates, Ukraine’s wheat harvest is expected to reach around 18-20M MT, which exceeds the quantity that the domestic market can consume. Since wheat stocks from last year are still high and the signed agreement on July 22nd, 2022, guarantees vessel passage at Ukraine seaports, traders are hoping for a positive outcome for wheat export. According to Anatoliy Stoianov, Tridge Origination Manager in Ukraine, an increase in export volumes will positively influence the sales activity and prices of agricultural commodities, including wheat.

According to Taras Vysotskyi, the First Deputy Minister of Agrarian Policy and Food of Ukraine, the wheat harvest in Ukraine is expected at 18-20M MT, five times more than domestic needs. Domestic consumption is around 4M MT per year, and stocks provide additional security from last year. Furthermore, since the signing of the agreement unblocking the Ukrainian ports on July 22nd, 2022, grain prices have been under pressure due to the expected export increase.

Source: Tridge

According to Anatoliy Stoianov, Tridge Origination Manager in Ukraine, an increase in export volumes will positively influence the sales activity and prices of agricultural commodities, including wheat. Ukraine exported USD 4.72B worth of grain in 2021, the most significant export value on record. However, Ukrainian farmers will not be able to ship similar volumes in 2022 due to the Russian invasion of Ukraine. Ports Odesa and Mykolayiv are the largest Ukrainian seaports in the Black Sea. These two ports can load up to 6M MT of grains per month. Without access to these ports, farmers might be unable to export sufficient volumes to have enough storage space for the next harvest. Currently, Ukrainian exporters mainly use the Reni and Izmail ports for grain exports located in the South of Ukraine and export grains over land via railways and trucks through its Western borders. These alternative export routes can load around 2M MT per month. If the principal seaports of Odesa and Mykolayiv ran to total capacity, Ukraine could increase its grain export volumes by almost tri-fold.

The Odesa seaport can load containers and bulk cargoes, but Mykolaiv is focused on bulk freight. According to the 2020/21 MY results, the top five largest grain terminals include one terminal located in the Chernomorsk seaport and two terminals each in the Mykolaiv seaport and the Pivdenny seaport. The total share of transhipments of these five terminals amounted to 48.3% of the total volume of grain cargo handling in the country's seaports. In June 2022, Ukraine increased exports of agricultural products by 30%, according to the Ukrainian customs service report. Ukraine also managed to export 2.7M MT of farm products through alternative routes due to the blocking of seaports by Russian troops. In comparison to May 22, it is a 30% MoM increase.

Grains accounted for most of the export on June 22 with 1.4M MT (corn - 86%, wheat - 10%, barley - 3%). Growth compared to last month, an 23% MoM increase.

Wheat Wholesale Prices in European Countries

Source: Tridge

The opening of ports and traders' expectation that 17 ships loaded with Ukrainian grain will depart from Odesa and Chornomrsk, 10 of which are ready for departure, according to the Ukraine Ministry of Infrastructure. The first ship passed from Odesa on August 1st, 2022, carrying 26K MT of corn, marking a milestone re-establishment of Ukraine trade. Global access to Ukrainian grain has already affected the wheat price movements in the worldwide market. Wheat prices offered in Asia began to slide lower in the W5 of July 22 in anticipation of an increase in trade and inventories. Wheat from the Black Sea region was quoted below USD 400/MT, including cost and freight (C&F), to Southeast Asia for September shipment, down from around USD415/MT mentioned in W1-2 of July 22.

Uncertainty surrounding the first grain shipments from Ukrainian ports continues to prevail among traders, while the details of safe passage are still being determined. Due to the Russia-Ukraine conflict, Ukraine's wheat exports have suffered significant damage. With the new 2022 crop of wheat from Ukraine comes the problem of storage, the slow export of last year's crop, and the decline in the quality of both old and new wheat caused by inadequate storage. Outlook for global wheat prices will highly depend on stocks, which are tight at the moment.

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