Grain prices surge as Ukraine war chokes off Black Sea ports

{"text":[[{"start":7.48,"text":"Wheat prices have surged as escalating attacks by Russia and Ukraine on each other’s Black Sea ports and commercial vessels threaten to choke off seaborne grain exports from two of the world’s biggest suppliers."}],[{"start":18.98,"text":"Benchmark wheat futures have risen to near three-year highs as traders react to mounting disruption to export operations, including attacks on Ukraine’s biggest port on the Danube and on Russia’s Black Sea terminals at Novorossiysk in the past fortnight."}],[{"start":32.04,"text":"“It’s worse for the wheat market than Hormuz was for crude,” said Andrey Sizov, managing director of SovEcon, a research firm focused on Black Sea agricultural markets, in reference to the impact on global energy supplies of the near closure of the Strait of Hormuz during the Iran war."}],[{"start":48,"text":"“The longer this drags on, the bigger the consequences we will see,” he said, given that there was no sign of de-escalation in Russia’s war on Ukraine."}],[{"start":57.22,"text":"Russia is the world’s largest exporter of grains and Ukraine the fifth largest. Together, they supply about 30 per cent of the world’s wheat. Disruption across the two countries’ ports in the Azov and Black Sea basin is set to reduce global supplies by as much as 86mn tonnes this year, or about 17 per cent of global cereal exports, according to Oxford Economics, with 52mn tonnes of Russia’s exports affected and 34mn tonnes of Ukraine’s."}],[{"start":84.08,"text":"The consultancy said alternative routes for Ukrainian exports by rail and the Danube river would replace only about 17mn tonnes, even if additional capacity on those routes became available."}],[{"start":null,"text":"

"}],[{"start":95.26,"text":"Russian strikes on cargo ships have brought to a standstill shipping through Odesa, Ukraine’s biggest seaport, and other Ukrainian Black Sea ports, just as the country’s main harvest gets under way. At the same time, a Ukrainian attack on Novorossiysk last week has forced all three of the Russian port’s major grain terminals to halt operations."}],[{"start":113.12,"text":"While Ukraine has agreed at the urging of US vice-president JD Vance not to repeat its attacks on tankers using Novorossiysk’s oil terminal, it has made no such undertaking about its grain terminals."}],[{"start":125.22,"text":"The disruption has come at a particularly bad time. The winter wheat harvest is well advanced in both countries and August marks the beginning of the peak period for shipping the new crop to international buyers."}],[{"start":137.56,"text":"The recent attacks have dramatically reduced the amount of grain moving out of Ukraine, which relies on agriculture for 60 per cent of its export revenues. Its grain exports this month are down about 75 per cent from last year, according to government data."}],[{"start":152.64,"text":"Russia is also struggling to move its crop after Ukraine intensified attacks on its ports and ships. SovEcon expects it to export about 2.2mn tonnes this month, down from about 4.6mn tonnes in August 2025, with the bulk of shipments moving through routes outside the Azov and Black Sea basin."}],[{"start":172.16,"text":"“Russia’s Black Sea and Azov grain export capacity is currently shut down,” Sizov said, with export capacity in the region cut from about 3.3mn tonnes a month to about 250,000 tonnes at Russia’s only remaining operational facility at the Black Sea port of Tuapse."}],[{"start":188.88,"text":"“We do not rule out further attacks on Novorossiysk, particularly given reports that local air-defence systems have been heavily damaged,” Sizov said."}],[{"start":198.08,"text":"Surging wheat prices are adding to pressure on agricultural commodities from widespread drought, disruption due to the El Niño weather pattern and fertiliser shortages resulting from the Iran war, raising fears that the latest escalation could feed into a broader rise in global food prices."}],[{"start":null,"text":""}],[{"start":213.12,"text":"“We expect global food prices to increase 11.8 per cent this year . . . and 4.8 per cent in 2027,” said Tatiana Orlova, lead economist at Oxford Economics. While this year’s food inflation is likely to be less than last year’s, she added, “given that Russia is the largest grain exporter globally and Ukraine is the fifth largest, the recent escalation of fighting in the Azov and Black Sea basin could result in a more severe global food price shock”."}],[{"start":241,"text":"Grain prices soared to record highs following Russia’s full-scale invasion of Ukraine in 2022, but fell following a UN-brokered Black Sea grain initiative, which allowed the free passage of ships. After the deal collapsed in July 2023, Ukraine developed new export routes along the Black Sea coast to the Romanian port of Constanţa and along the Danube."}],[{"start":263.2,"text":"However, this year’s summer of extreme heat and low rainfall has lowered water levels in the Danube, reducing the amount of cargo vessels can carry and increasing freight costs. Russia also attacked infrastructure at Izmail, Ukraine’s biggest grain-exporting port on the Danube, last week."}],[{"start":null,"text":""}],[{"start":281.28,"text":"Despite the rise in wheat futures, some analysts argue that prices still do not adequately reflect the risk of a prolonged disruption to Black Sea supplies."}],[{"start":290.48,"text":"Even before the latest attack on Novorossiysk, agribusiness research group BMI warned that the market was pricing in “relatively little sustained disruption”, a position it described as “misguided”. A prolonged or repeated interruption to Russian and Ukrainian exports would have consequences for global wheat supplies that were “disproportionately large relative to what current pricing implies”, it said."}],[{"start":314.68,"text":"“Commodity traders don’t believe in supply shocks anymore,” said Sizov, adding that since 2022 the market has embraced the idea that all problems in the Black Sea are temporary. “‘Sooner or later it will resolve and the market will tank’ . . . that’s a very popular way of thinking.”"}],[{"start":331.2,"text":"Nonetheless, Sizov said, he expected the three-year high reached in wheat futures in July to soon be “surpassed”."}],[{"start":344.34,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1787198735_9852.mp3"}