Due to tension in the Black Sea, Iraq seeks alternative grain markets
![Due to tension in the Black Sea, Iraq seeks alternative grain markets](https://media.shafaq.com/media/arcella/1643530158229.jpg)
Shafaq News/ Even though the grain trade in the Black Sea region remains largely unmoved by the ongoing tensions between Russia and Ukraine, Iraq is seeking alternative market to buy its needs.
Russia and Ukraine are major players in global grains market.
Russia and Ukraine's combined wheat exports for the 2021-22 marketing year are estimated to account for 23% of the global total of 206.9 million mt, according to the US Department of Agriculture. For corn, Ukraine is likely to account for 16% of global corn exports.
With the escalating tensions in the region, wheat prices in Russia and Ukraine have been under pressure since the beginning of January.
According to Platts data, FOB prices of Ukrainian 11.5% protein wheat stood at $319/mt on Jan. 27, down 4% month on month, while 12.5% Russian wheat FOB prices declined 3% month on month to $327/mt.
For corn, concerns over supplies from Ukraine and other competing nations were likely behind the recent gains.
FOB prices of Ukrainian corn have gained nearly 4% over the past month and stood at $283.25/mt on Jan. 27, according to Platts data. Weather issues in South American countries have likely added to the corn supply concerns globally.
Wheat exports from both Russia and Ukraine have dipped slightly since tensions escalated in late December. However, traders identified other reasons for the slowness seen over the last month.
"Wheat exports have fallen slightly but that is not primarily due to the standoff concerns," a trader based in Kyiv said.
For Russia, exports reached 2.6 million mt during the month to Jan. 20, down from 3.2 million mt in the previous month.
Overall, since the current marketing year began July 1 and through Jan. 20, Russian wheat exports were 21% lower year on year at 23 million mt.
Traders said the decline in Russian wheat exports was primarily due to the steep rise in export taxes and the export quota placed on food grains.
S&P Global Platts Analytics estimated Russia's 2021-22 marketing year wheat exports at 36.5 million mt and projected its wheat crop at 77.6 million mt.
For Ukraine, traders said exports fell marginally during the month as the exportable surplus of wheat is tightening after the country saw a strong export campaign.
Ukraine shipped out 16.6 million mt wheat in MY 2021-22 up to Jan. 24, up 29% year on year. In the month to Jan. 24, Ukraine exported 1.2 million mt, down from 1.4 million mt in the previous month.
However, due to the uncertainty, some Middle East nations like Iraq are looking at locations other than the Black Sea to source their wheat, market sources said. Iraq recently bought around 150,000 mt of Australian premium quality wheat, they said.
According to traders, Argentina has also become a major competitor for Black Sea wheat in respect to the Middle East markets.
However, traders expect the impact on wheat trade to be limited despite the continuing uncertainty.
For MY 2021-22, Platts Analytics projects Ukraine will produce 31.2 million mt of wheat and export 22.5 million mt.
Although analysts and traders have expressed concerns about the tense situation, Ukraine's corn trade is not yet reflecting the uncertainty.
Demand from China, Ukraine's leading corn export destination, is steady and analysts do not predict any near-term impact.
China is buying Ukrainian corn at a regular pace, said Elena Neroba, a market analyst with grain trading firm Maxigrain. Ukraine's placement as a non-GMO producer provides some advantage over other competitors when it comes to China, she said.
Terry Reilly, senior commodity analyst with Futures International, echoed that view. "China could easily switch to the US if Ukraine corn exports get disrupted, but we don't see this in the near future," Reilly said.
Uncompetitive prices and low demand are the factors the market will be watching out for when it comes to Ukrainian corn exports, said Neroba.
As of now, Ukrainian corn prices are competitive against the US, while supplies from South American countries will not appear in the markets for another few months, which is likely to strengthen Ukraine's position as a supplier. However, any export curb from Ukraine could send the demand to the US.
In the 2021-22 (October-September) marketing year, Ukraine is likely to produce 40 million mt of corn, almost 10 million mt higher year on year, according to Platts Analytics, with 38% higher export potential this year at 33 million mt.