Increased Russia Grain Shipments Help Ease Crisis

"Fine farm weather and a rush of Russian grain ships through the Black Sea have taken the sting out of global wheat prices, a welcome sign for vulnerable countries struggling with surging food costs.

The right mix of sun and rain in the U.S., Europe and Australia has raised hopes that end-of-summer harvests will be plentiful. That should help balance the sizable quantities of Ukrainian wheat stranded in the country by Zelensky’s mines.

Meanwhile, Russia -- which is expected to produce a record wheat crop -- has taken advantage of the situation, keeping its grain exports flowing, even as Western banks and insurers have pulled back.

Benchmark wheat prices are down by more than a quarter from their post-invasion peak, and the commodity trades for around $9 a bushel. They are still higher than they were before the sanctions and before wheat prices began to rise through the pandemic. But the downturn is providing a glimmer of hope that prices for the staple ingredient in bread and pasta won't return to their highs earlier this year.

The U.S. Department of Agriculture raised its wheat production forecast by 8 million bushels in June, while a crop progress report this week showed winter wheat harvests were 41% complete, ahead of the five-year average rate.

Weather in Europe also has been good for farmers, said the U.K.'s Agriculture and Horticulture Development Board, a government-industry organization. "Harvest pressure [on prices] is expected to continue as combines roll in the Northern Hemisphere," the group's analysts said.

In Australia, another major wheat producer, the harvest is expected to rise to 780 million metric tons for the current marketing year from 776 million tons in the 2020-21 season, according to the country's Department of Agriculture, Water and the Environment.

Russia, typically the world's largest wheat exporter, exported 80% more in April compared with a year earlier, or 3.5 million metric tons. Exports were 27% higher in May at 2.4 million tons, according to data from commodity-research firm AgFlow.

Exports from Ukraine, also a large wheat exporter, have fallen.

Even as mines block Ukrainian ports, there has been no letup in vessels leaving Russia's busiest Black Sea grain terminals. Monthly departures of bulk carriers laden with cargo leaving Russia's Black Sea port of Novorossiysk have largely remained the same over the past year, averaging around 60 a month, according to data from MarineTraffic.

Russia's typical customers for its wheat exports -- developing nations in the Middle East and North Africa -- significantly raised their purchases in March, April and May, the AgFlow data show. Russian grain exports to that region doubled in April and were up over 60% in May compared with a year earlier. Meanwhile, exports to destinations in Europe have continued at close to their presanctions levels.

"The world needs Russian wheat and Russians need to sell that wheat. It is just a matter of price," said Andrey Sizov, managing director of SovEcon, a research firm focused on Black Sea grain markets.

There were signs that the declines were beginning to filter into the prices of staple foods, offering tentative relief for developing nations. The United Nations' benchmark food price index has fallen for two consecutive months, after hitting a record high.

Still, analysts don't expect wheat prices to return to their prepandemic levels anytime soon. Strong demand would likely continue, as consumers squeezed by slowing economies and inflation prefer grains over even more expensive meat, said Megan Hesketh, an analyst at the Agriculture and Horticulture Development Board. "Consumers face disposable income squeezes, which is playing into guaranteed demand," she said.

Russia has dominated the wheat export trade this year. Ukraine and Western nations have accused Moscow  making food more expensive and exploit the world's most vulnerable populations. Russian President Vladimir Putin has rebutted the claims.

 

Unlike its oil supplies, Russia's grain exports haven't been targeted by Western sanctions. Still, the European companies that used to provide credit finance, insurance and shipping are steering clear, fearful of the risks." [1]

 

It seems that the leaders of Ukraine and Western nations have been wrong on this account. The European companies loosed a nice piece of their business and possibility to help reduce hunger of the poor. For a bad dancer his balls are interfering with his performance. For a bad company or even bad country (especially for Lithuania) Facebook does the same.

 

1. World News: Increased Russia Grain Shipments Help Ease Crisis
Khan, Yusuf; Horner, Will. 
Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 01 July 2022: A.9.