Ukraine shuts ports as conflict threatens world's grain supplies

A Ukrainian naval vessel patrolling the port of Mariupol in Ukraine on Feb 24, 2022. PHOTO: REUTERS

MOSCOW (REUTERS) - Ukraine's military has suspended commercial shipping at its ports after Russian forces invaded the country, an adviser to the Ukrainian president's chief of staff said, stoking fear of supply disruption from leading grain and oilseeds exporters.

Russia earlier ordered the Azov Sea closed to the movement of commercial vessels until further notice, but kept Russian ports in the Black Sea open for navigation, its officials and five grain industry sources said on Thursday (Feb 24).

Global farm commodities trader Cargill said an ocean vessel it chartered was "hit by a projectile" on the Black Sea, but that the ship remained seaworthy and all crew members were safe.

Ukraine is a major exporter of corn, much of it destined for China and the European Union. It also competes with Russia to supply wheat to major buyers such as Egypt and Turkey.

Industry estimates currently put Ukraine's grain exports at about five million to six million tonnes a month, comprising about 4.5 million tonnes of corn, one million tonnes of wheat and a remaining share of mainly barley.

Main grain export ports include Chornomorsk, Mikolayiv, Odessa, Kherson and Yuzhny.

Egypt's state grains buyer cancelled an international purchasing tender for wheat on Thursday amid reports that no offers of either Russian or Ukrainian wheat had been received.

"The market is still struggling to get a clear picture of the actual military situation on the ground. The ports in the Azov Sea and Black Sea so far seem not to have been damaged, according to the initial shipping agency reports," one European grain trader said.

The trader said the market was looking out for any declarations of force majeure, meaning suppliers will not fulfil contractual obligations because of extreme circumstances.

Shipping group Maersk said on Thursday it had halted all port calls in Ukraine until the end of February and has shut its main office in Odessa on the Black Sea coast because of the conflict.

Global agricultural commodities trader Bunge said on Thursday it had shuttered company offices in Ukraine and that operations in its Black Sea grains port in Nikolaev, Ukraine, had been suspended. Competitor Archer-Daniels Midland said its Ukraine facilities, including an Odessa export terminal, were not operating.

Russia, the world's largest wheat exporter, mainly ships its grain from ports in the Black Sea.

The Azov Sea's ports are shallower and have less capacity.

Mariupol, reported to be under attack from Russian forces, one of the biggest Ukrainian ports in the Azov Sea, mainly handles relatively small ships of between 3,000 and 10,000 tonnes deadweight.

The Azov Sea ports export wheat, barley and corn to Mediterranean importers, including Cyprus, Egypt, Italy, Lebanon and Turkey.

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Another European trader, speaking on condition of anonymity, said such countries would have to seek alternative supplies if the ships were unable to depart in the near future.

United States wheat futures rose to the highest level in nearly a decade as the conflict threatened to disrupt the flow of supplies from the region, while European wheat futures climbed to a record peak.

Russia and Ukraine account for 29 per cent of global wheat exports, 19 per cent of world maize (corn) exports, and 80 per cent of world sunflower oil exports.

Russia produced 76 million tonnes of wheat last year and is expected by the US Department of Agriculture to export 35 million tonnes in the July to June season, 17 per cent of the global total.

Russia supplies wheat to all the major global buyers. Turkey and Egypt are the largest importers.

Ukraine asked Turkey on Thursday to close the Bosphorus and Dardanelles straits to Russian ships, the Ukrainian ambassador to Ankara said.

Turkish President Tayyip Erdogan said he backed Ukraine's territorial integrity but there was no immediate response to Kyiv's request.

Under the 1936 Montreux Convention, Ankara has control over the straits and can limit the passage of warships in wartime or if threatened.

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