Reuters – Asian millers will look elsewhere for their wheat as attacks on Ukrainian ports after the collapse of a safe passage deal spark supply risks, traders and analysts said.
Supply constraints from the key Black Sea region add further uncertainty amid the prospect of dry El Niño weather threatening Asian crops and exacerbating food inflation worries.
“Traders and mills will be looking for alternative sources of supply,” said one Singapore-based trader at an international trading company.
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“They are going to be potentially looking at Europe and cargoes from other Black Sea exporters like Romania and Bulgaria. Australia still has wheat to sell from its harvest last year.”
Russian strikes on Ukrainian port areas continued July 20, local authorities said, after Moscow warned that ships heading to Ukraine’s Black Sea ports could be considered military targets.
Russia attacked the Odesa region on the nights of July 17-18. The attack on the southern Ukrainian port of Chornomorsk damaged grain export infrastructure and destroyed thousands of tonnes of stored grain.
“The market was hopeful that navies of other countries might escort shipment of goods in and out of Ukraine regardless of Russia not renewing the grain corridor,” said Rabobank senior grains analyst Dennis Voznesenski.
“But the attack on Odesa port and subsequent statement from Russia that any ship sailing to Ukraine’s Black Sea ports would be seen as carrying military cargoes has made that very unlikely,” he said.
Millers in the Middle East, Africa and Asia have bought millions of tonnes of wheat and corn from the region, which is entering its peak export season.
“It is hard to put an exact number as traders have signed private deals, but mills in Asia have easily booked more than one million tonnes of Black Sea wheat for shipment in July, August and September,” said a second trader in Singapore.
Indonesia (the world’s second-largest wheat importer), Malaysia and Vietnam have bought Black Sea cargoes to be milled for flour for noodles and bread. South Korea, Thailand and the Philippines take Ukrainian wheat mainly for animal feed.
Prices of Black Sea wheat offered in Asia are expected to rise as supplies tighten, traders said.
