Russia Suspends Ukraine Export Deal in Potential Blow to Global Grain Supply Chains

Russia suspended its participation in the Black Sea Grain Initiative, dealing a blow to war-torn Ukraine’s ability to export wheat, corn, and other food staples that it normally ships to countries in North Africa, the Middle East, and Asia. 

The cancellation of the export accord comes as other Northern Hemisphere countries are harvesting their winter wheat crops, which could mute the immediate impact of the Black Sea Grain Initiative’s suspension. Ukraine, too, is currently harvesting its wheat crop and cancellation of the Initiative could cause wheat supplies in the country to quickly back up.

Russia’s own wheat exports could get a boost from the suspension of the Initiative. Russian wheat exports are forecasted to reach a record in 2023/24 as high yields resulted in a large harvest for the country’s winter wheat, as seen with Gro’s Russia Winter Wheat Yield Forecast Model. Russian wheat export prices are undercutting all other origins, favoring the country’s shipments, as seen in this Gro display. 

In 2022/23, Russian wheat exports increased by 38%, or 12.5 million tonnes, from the previous year, before the war began. Meanwhile, Ukraine’s wheat exports fell during that same period by 11%, or 2 million tonnes.   

In the current year, Ukraine wheat production is forecasted to be down by nearly 20% year over year, representing a 50% drop from the prewar, 2021/22 period. The upcoming August-October period is normally Ukraine’s biggest export window. But last year during these months Ukraine exported just 4.7 million tonnes of wheat — a near-60% decline from the previous year, before the Russian invasion. 

Ukraine has increased its grain exports via rail to European countries, for transhipment to other countries. But this route can only absorb a fraction of what Ukraine normally exports from its seaports. 

Russia had been signaling for a while that it might not renew the Black Sea Grain Initiative. CBOT wheat and corn futures prices showed little reaction to the news. The Black Sea Initiative, first signed in July 2022, was due to expire on Monday after having been renewed three times. 

Russia appeared to leave the door open to reentering the Initiative if its conditions are met. But if there is no agreement in the coming weeks, the global wheat supply and demand balance sheet could further tighten amid uncertain 2023/24 wheat production prospects in many parts of the world. 

Wheat production in Argentina, Australia, Canada, and the EU is forecast to be lower than last year because of dry conditions, as seen in this display that shows the Gro Drought Index, soil moisture levels, and other growing conditions aggregated for wheat growing areas in the four regions combined using Gro’s Climate Risk Navigator for Agriculture. 

The US total wheat crop for 2023 is forecast to increase 5.4% from last year, as stronger yields in winter wheat are expected to offset lower production from the drought-hit spring wheat crop. 

Suspension of the Black Sea Grain Initiative highlights the importance of keeping track of wheat supplies around the world. Gro’s newly released Commodities Tracker offers digestible, top-line metrics that help users understand the market and climate conditions that drive supply risk. These insights update daily and are useful to any business procuring agricultural commodities.

The map below shows the latest update of the Gro Commodities Tracker for Common Wheat. Based on weather and crop growing conditions in major wheat producing countries in the Northern Hemisphere, the Tracker currently indicates that Global Supply Risk for Common Wheat is at Medium level. To request a demo of the Gro Commodities Tracker, and to learn how it can help your organization, click here.