Major grain exporters see more supply woes on Ukraine volatility

Strong grain demand will outstrip supply for years to come, stoking more volatility that’s been exacerbated by the war in Europe, according to one of Australia’s biggest wheat exporters.

With global inventories at historically low levels, pressure on supply is increasing due to the conflict affecting the Black Sea shipping corridor, as well as the lingering effects of the pandemic, said GrainCorp Ltd. Chief Executive Officer Robert Spurway. 

Russia’s invasion of Ukraine in February choked off more than a quarter of global wheat exports from a region known as the breadbasket of Europe. A United Nations-brokered deal in July has allowed some crop shipments to trickle through the Black Sea in recent months, but the pact expires on Nov. 19.

Supply threats created by the war in Ukraine weren’t likely to abate for at least two to three years, Spurway said in an interview Wednesday. The company sources grain from Ukraine, Canada, and the UK, as well as Australia.

“Even with the recovery that we’ve seen in some exports out of the Black Sea from Ukraine through the UN-sponsored grain corridor, that’s nowhere near keeping up with the demand that exists,” Spurway said. “If anything, there’s a greater risk on the supply side.”

There’s further demand upside as some importers seek to build buffers, such as increasing inventories, to protect themselves from supply risks, Spurway said. Meanwhile, Ukrainian growers are still facing challenges in getting their grains to market, he said.

“Most of the major grain traders and operators, including ourselves and indeed the vessel operators, are not falling over themselves to go into the Black Sea where significant risk -- and in many cases lack of insurance -- makes it a highly speculative and risky business,” Spurway told analysts on a call earlier Wednesday.