Escalation in the Russian-Ukraine conflict, with implications for grain trade out of the Black Sea

By Jane Byrne

- Last updated on GMT

© GettyImages/klenger
© GettyImages/klenger

Related tags Black Sea Ukraine Russia Wheat

Further Russian attacks have taken place in Odessa, whilst British Intelligence has issued a warning that the Russian navy are planning to blockade Ukrainian ports, a scenario which could cause wider spread disruption to Black Sea exports, reported CRM Agri.

Insurance premiums on vessels have risen sharply.

In other wider market developments, central banks continue to tackle inflation with further interest rate rises in the past days, from both the US Federal Reserve and the European Central Bank (ECB).  Gold prices corrected lower yesterday as US GDP data was strong than expected at 2.4% which markets viewed as supportive to the case for lower interest rates to come, commented the CRM Agri team.

The analysts reviewing crop condition reports from the US, noted that the area of corn under drought conditions has risen over the past week by 4 percentage points, to 59%. Soybeans under drought were at 53%, a rise of 3 percentage points, while spring wheat experienced the biggest change, rising from 31% to 43% in drought.

In the UK, the AHDB planting and variety survey results showed that wheat area for 2023 decreased slightly by 3% to 1746Kha, with gains seen in barley and rapeseed; those crops rose by 5% and 11% respectively, whilst the oats area is expected to decrease by 7%.

European yield forecasts trimmed

Meanwhile, the EU Commission trimmed yield forecasts for all cereal and oilseed crops, except winter barley, in their July MARS report released this week. This follows drier-than-usual conditions in larger parts of western, central, and northern Europe, as well as in eastern Romania.

For many crops, though, yield forecasts remain above the five-year average, reported AHDB in a review​. “However, this is notably not the case for spring barley and sunflower yield forecasts, the most impacted by recent cuts. A downgrade in sunflower yield prospects for the key producer, Romania, was a key reason for this. For spring barley, the report details substantial downward revisions for Denmark, Sweden, Finland, and the Baltic Sea.”

Intense heatwaves have been seen across southern Portugal and Spain, as well as northern Italy. According to the Commission, this triggered a risk of heat-induced sterility for flowering summer crops, with potentially irreversible impacts on yields.

But rain has also been delaying harvest and causing potential impacts on grain quality in parts of Bulgaria and Romania, Slovenia, Croatia and Hungary. And the Commission raised questions around wetter-than-usual conditions in European areas of Russia, and the impact of that on crop quality.

Though above-average yields are still expected, the rainfall surplus is expected to have deteriorated grain quality, according to the MARS report.  

“With the export uncertainty surrounding Ukrainian grain, reliance on other major global exporters for global supply becomes increasingly in focus. This is particularly true for wheat, with stocks in global major exporters tight, though wheat stocks this season on the continent are still expected to be ample. But if quality issues are confirmed as EU harvests progress, we could see a widening of the gap between feed quality prices and other grades,” said the AHDB team.

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