SINGAPORE- Asian millers, which have bought more than 1 million metric tons of Black Sea wheat for shipment in coming months, will seek alternatives as attacks on Ukrainian ports after the collapse of a safe passage deal spark longer-term supply risks, traders and analysts said.
Indonesia, the world’s second-largest wheat importer, Malaysia and Vietnam have bought Black Sea cargoes for milling into flour for making products such as noodles and bread.
South Korea, Thailand and the Philippines take Ukrainian wheat mainly for animal feed.
Supply constraints from the key Black Sea region add further uncertainty amid the prospect of dry El Nino weather threatening crops across Asia, exacerbating worries over food inflation.
Chicago wheat futures climbed more than 2 percent to hit a three-week high on Thursday as infrastructure damage following Russia’s attacks on Ukrainian ports buoyed prices.
“Traders and mills will be looking for alternative sources of supply,” said one Singapore-based trader at an international trading company.
“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 on Thursday, 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 Monday and Tuesday nights. The attack on the southern Ukrainian port of Chornomorsk damaged grain export infrastructure and destroyed thousands of tons 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, which are heavily reliant on Black Sea supplies, have bought millions of metric tons of wheat and corn from the region, which is entering its peak export season with freshly harvested crops reaching the market.
“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 tons of Black Sea wheat for shipment in July, August and September,” said a second trader in Singapore.
Prices of Black Sea wheat offered in Asia are expected to rise as supplies tighten, traders said.
“As of now not many exporters are quoting prices but before the attacks, mills in Indonesia bought Black Sea wheat at around $275 a ton, including cost and freight,” the first Singapore trader said.
Meanwhile, Russian strikes on Ukrainian port areas continued on Thursday, local authorities said, after Moscow warned that ships heading to Ukraine’s Black Sea ports could be considered military targets.
As concerns grew over Russia pulling out of a deal that has protected global shipments of Ukrainian grain, authorities in the Mykolaiv and Odesa regions reported some 20 people injured in the strikes.
With Russia’s exit from the year-old threatening to worsen global food supplies, Ukraine said on Wednesday it was establishing a temporary shipping route via Romania, a neighboring Black Sea country.
“Its goal is to facilitate the unblocking of international shipping in the north-western part of the Black Sea,” Vasyl Shkurakov, Ukraine’s acting minister for communities, territories and infrastructure development, said in a letter to the UN’s International Shipping Organization.
Ukraine and Russia are among the world’s top grain exporters. US wheat futures jumped 8.5 percent on Wednesday, their biggest daily gain since days after Russia’s Feb. 24, 2022, invasion of its neighbor.
Russia’s Defense Ministry said flag states of ships travelling to Ukrainian ports would be considered parties to the conflict on Ukraine’s side.
After the last ship left Ukraine on Sunday under the Black Sea Grain Initiative, Russia attacked the Odesa region on Monday and Tuesday nights. The region’s three ports had been the only ones operating in Ukraine under the grain deal. – Reuters
