In 2022, when invading Russian forces attacked Ukrainian infrastructure in the region, the price of wheat and other grains spiked worldwide. CLOSE TO A third of global wheat exports sail out of Russian and Ukrainian ports on the Black Sea and the Sea of Azov. It took a Turkish-brokered deal and the establishment of a protected Ukrainian shipping corridor to bring them down. In recent weeks renewed fighting has again been disrupting exports—and this time not only Ukraine’s sales are getting thumped. Analysts have started to ask if a second global grain crunch could be on the way.
The impact is already stark. That made up a big dollop of the 16m tonnes that crossed borders around the world that month. Both countries are exploring alternative ways of getting goods to market. They face big difficulties in doing so. Moreover, farmers elsewhere in Eastern Europe grumble that the workaround creates extra demand for shipping and haulage; that pushes up their transport costs even as it reduces demand for their produce, notes Joseph Glauber of the International Food Policy Research Institute, a Washington-based group. But these routes can probably handle only a fraction of the backlog.
In August last year Russia and Ukraine exported 6.3m tonnes of wheat between them. This August their combined exports may reach only about 2.5m tonnes, and could fall further if hostilities continue, reckons Ishan Bhanu of Kpler, a data firm. During the crisis in 2022 Ukraine began using road and rail to get its grain to the Danube River, along which it could travel to Black Sea ports considered safe from attack, such as Constanta in Romania.
Because of low water levels, but capacity on this route is limited, and particularly so this year.
Disruption to agricultural exports leaving the Black Sea is “the worst it has ever been” since the region became a major route for global foodstuffs, says Carlos Mera, an analyst at Rabobank. As for Russia, its agriculture ministry says it is working to send more grain to ports on the Baltic and Caspian seas.
Because of drought and in part because farmers bet that other crops would be more profitable, notes Mr Glauber, wheat exports from America, Canada and the European Union will probably fall this year, in part. He says Australia’s wheat crop could fall by more than 20% due to the El Niño weather pattern and increased fertiliser costs (caused by hold ups in the Strait of Hormuz). The world is still far from the grain crunch of four years ago. But if disruptions in the Black Sea last, prices will keep heading up.
Whereas last year’s global wheat harvest was bountiful, this year’s seems likely to disappoint.
