Global grain trade worth $163 billion being redrawn by Russia's war on Ukraine

Deliveries of grains from Russia and Ukraine have become increasingly difficult to get to buyers. PHOTO: REUTERS

LONDON (BLOOMBERG) - Across Ukraine's farm belt, silos are bursting with 15 million tonnes of corn from the autumn harvest, most of which should have been hitting world markets.

The stockpiles - about half the corn that Ukraine had been expected to export for the season - have become increasingly difficult to get to buyers, providing a glimpse into the turmoil Russia's war has wrought in the approximately US$120 billion (S$163 billion) global grain trade.

Already gummed up by supply chain bottlenecks, skyrocketing freight rates and weather events, markets are bracing for more upheavals as deliveries from Ukraine and Russia - which together account for about a quarter of the world's grain trade - turn increasingly complicated and raise the spectre of food shortages.

Before Russia's attack, Ukraine's corn would have made its way to Black Sea ports like Odesa and Mykolaiv by rail and loaded onto ships bound for Asia and Europe. But with the ports shuttered, small amounts of corn are creakily winding their way westwards by rail through Romania and Poland before being shipped out. An added aggravation: Wheels on the wagons have to be changed at the border because unlike European rails, Ukrainian train cars run on wider, Soviet-era tracks.

"Railways are not supposed to go that way with the grain," Ukrainian Agribusiness Club deputy chair Kateryna Rybachenko said in an interview. "This makes the whole logistics very expensive and inefficient, and also very slow. Logistically, it's a big problem."

Ukraine is one of the world's biggest exporters of corn, wheat and sunflower oil - flows of which are largely stalled. Grain exports are currently limited to 500,000 tonnes a month, down from as much as five million tonnes before the war, a loss of US$1.5 billion, the country's agriculture ministry says. Crops from Russia - the world's biggest exporter of wheat - are still flowing, but questions persist over delivery and payment for future cargoes.

Disruptions in the flows of grains and oilseeds - staples for billions of people and animals across the world - are sending prices soaring. Countries fearing potential food shortages are scrambling to find alternative suppliers and new trades are emerging.

India, which historically kept its huge wheat harvests at home - thanks to a government-set price - is jumping into the export market, hawking record amounts across Asia. Brazil's exports of wheat in the first three months have far surpassed those in all of last year. United States corn cargoes are heading to Spain for the first time in about four years, and Egypt is considering swopping fertiliser for Romanian grain and holding wheat talks with Argentina.

Sales for Australia, a large wheat exporter, are running at full tilt, with shipping slots booked for months and buyers purchasing the grain further out than usual.

Even those efforts may not be good enough, said Mr Dan Basse, president of AgResource, an agriculture market research firm.

"We can move the deck chairs around today," he said. But if the conflict stretches into the summer, when wheat exports from the Black Sea usually accelerate, "then you start running into problems".

"That's when the world starts to see shortfalls," Mr Basse added.

Alternative suppliers come with pricier freight, longer transits or differing quality, further accelerating food inflation. World supplies were already reeling from droughts in Canada and Brazil and transport blockages in other parts of the world, from rail logjams in the US to trucker strikes across Spain. The added shock from the war sent a gauge of prices to a record, with corn and wheat futures in Chicago up more than 20 per cent since the beginning of this year.

The United Nations has warned that food prices - already at an all-time high - could rise as much as 22 per cent more. A severe drop in Black Sea exports could leave as many as 13.1 million additional people undernourished, it said, deepening the rise in global hunger in a world still recovering from the effects of the Covid-19 pandemic.

Some governments are limiting trade to counter higher food prices. Serbia, the ninth-largest corn shipper, temporarily barred exports. Argentina and Indonesia increased taxes on vegetable oil exports, and Kazakhstan will limit wheat shipments. The global grain trade, not including rice, could shrink by 12 million tonnes this season, the most in at least a decade, the International Grains Council estimates.

"High prices more often than not, rather than just having more exporters, will result in protectionism," said Rabobank senior analyst Michael Magdovitz.

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