The Black Sea Grain Initiative, which was due to expire on November 19, was extended on Thursday for 120 days, helping to ease concerns about grain supplies coming from the war-torn Black Sea region.
The agreement, originally signed in July, allows Ukraine, a major producer of grains and oilseeds, to ship agricultural products from Black Sea ports safely. No changes were made to the original agreement, which had been signed by the UN, Russia, Ukraine, and Turkey.
The extension of the deal offers some relief for global grain markets, especially wheat, which is facing the tightest supplies seen in years, as seen in this Gro display. Ukraine normally is the world’s sixth-largest exporter of wheat and the No. 4 supplier of corn. But since the start of the Russia-Ukraine war last February, shipments from Ukraine have been far below prewar levels, and aren’t anticipated to fully recover for the foreseeable future.
Since the start of the Black Sea Grain Initiative in July, Ukraine has exported some 11.08 million tonnes of agricultural products, according to UN data. This includes 4.6 million tonnes of corn and 3.4 million tonnes of wheat. Other commodities shipped include rapeseed, sunflower oil, sunflower meal and barley.
By comparison, Ukraine exported in the 2021/22 marketing year 18.8 million tonnes of wheat and 27 million tonnes of corn.
The outlook for global wheat inventories remains highly unclear. Drought conditions continue to weigh on new crops in the US and Argentina, both major wheat exporters. And great uncertainty lingers over Ukraine’s 2023/24 winter wheat crop amid the ongoing war. Ukraine plants its winter wheat in September-October with harvest in July-August.
Russia harvested its largest ever winter wheat crop this summer, which benefited from mild temperatures and adequate precipitation throughout the growing season, as shown in this display from Gro’s Climate Risk Navigator for Agriculture, weighted for Russia’s wheat growing regions. Yields rose for the year, as seen in the Gro Russia Winter Wheat Yield Forecast Model. Winter wheat accounts for 70% of Russia’s wheat production.
But Russia’s wheat exports have been slow to keep up. Industry estimates put Russia’s wheat exports about 10% below year-ago levels for the July to October period, but ramping up sharply in November.
Russia’s shipments in the next few months normally slow down due to storms and iced-over river navigation. In order to hit the lofty forecasts of record exports, spring shipments will have to be quite heavy. Russia has record wheat stocks and is currently the cheapest origin so they are set to fill global needs if logistics and geopolitical conditions permit.
Russia briefly halted participating in the Black Sea Grain Initiative last month amid ongoing hostilities in its war with Ukraine, driving global wheat and corn prices sharply higher. But commodity prices gave up their gains after Russia reversed its decision and rejoined the export deal, as Gro wrote about here.