Food markets threatened by Russia’s hit on grain infrastructure

Concerns are mounting over global food security and higher food prices following Russian air strikes that destroyed key Ukrainian grain warehouses and a wheat exports port on the Danube River. The Black Sea grain export corridor has been closed since July 17, disrupting market supplies and posing potential consequences for food markets worldwide.

The Izmail and Reni ports on the Danube River were expected to be alternative shipping routes after the Black Sea ports of Odesa, Berdyansk, and Mariupol became inaccessible due to Russia pulling out of a grain deal. However, the attack on the Danube ports halted these plans, potentially reducing the sea-based export volume from Ukraine to 800,000 to 1 million metric tons, compared to the usual 1.8 million to 2 million metric tons.

Ukraine’s wheat exports accounted for approximately 10% of the global wheat market and 15% of corn before the war. With the Danube River ports now affected, industry players are considering alternative shipping methods such as trains and trucks. However, these land routes have limitations, and the Danube ports remain critical for exports.

The uncertainty surrounding insurance availability for future shipments further complicates the situation. Traders may be reluctant to use the Black Sea/Azov region for trade, leading to potential disruptions in the supply chain.

In India, rice sowing rates have been impacted by floods in the north-west and insufficient rains in the south and east. As the world’s largest rice exporter, reduced shipments from India could have global price implications, affecting wheat prices as well since rice is a part-substitute for wheat.

At a summit in St. Petersburg aimed at strengthening Russian-African ties, Russian President Vladimir Putin assured African nations that Russia is ready to replace Ukrainian grain exports to Africa on a commercial and free basis. He announced plans to provide countries like Burkina Faso, Zimbabwe, Mali, Somalia, Central African Republic, and Eritrea with free grain shipments ranging from 25,000 to 50,000 metric tons over the next three to four months.

Putin defended Russia’s decision to leave the Black Sea grain deal, stating that promises made to facilitate its own grain and fertilizer exports had not been fulfilled. He highlighted that Russia achieved a record grain harvest last year, exporting a total of 60 million metric tons of grain, with 48 million tons being wheat.

The situation remains fluid, and the impact on global food markets and prices will depend on how events unfold in the region and how alternative shipping routes and supplies are managed in the face of ongoing geopolitical challenges.

Pan Finance is a print journal and news website providing worldwide intelligence on finance, economics and global commerce. Known for our in-depth analysis and opinion pieces from esteemed academics and celebrated professionals; our readership consists of senior decision makers from across the globe.

Contact us