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Wheat prices to rise due to Ukraine conflict, Rabobank says

More than a third of the world’s wheat exports come from the Black Sea region. Rabobank spells out what the conflict means for wheat, and for Australia

Russia’s invasion of Ukraine will have significant ramifications on the global and Australian grain and oilseeds market, according to agribusiness specialist Rabobank.

Rabobank agricultural analyst Dennis Voznesenski writes that wheat prices could rise by as much as 61 per cent from current levels if the conflict continues into July when the Black Sea harvest commences, having already risen 21 per cent since the beginning of February.

The ongoing conflict in Ukraine will likely result in grain exports ceasing in the short term due to blockages to shipping and the costs associated with exporting grains.


Wheat prices could rise as much as 61 per cent

Western sanctions targeting Russia will also likely impact wheat exports and will result in structural changes to global wheat flows, according to Rabobank.

Both Ukraine and Russia are among the world’s top producers of wheat according to figures from the Food and Agriculture Organization of the United Nations (FAOSTAT).

Together, Ukraine and Russia, along with other wheat-producing countries in the Black Sea region such as Turkey, Romania and Bulgaria, account for 34 per cent of global wheat exports.

Any loss of access to wheat exports from the Black Sea region would be the first occurrence of such since an Ottoman Empire blockade on wheat supplies in October 1914 during the First World War.

In that instance, wheat prices rose 45 per cent in four months, Voznesenski says.

In Australia – the globe’s sixth biggest wheat producing nation – wheat and grain exports could experience increased demand if Black Sea exports are unavailable, especially following the record winter harvest.

Should the Russo-Ukraine War continue as a full-scale conflict, resulting in a halt to Black Sea exports, local prices could rise from A$367/tonne to A$425/ tonne in the short-term, with prices rising sharply should the conflict and sanctions continue and affect supplies into July.

That said, limits on Australia’s export capacity and the size of its recent large harvest will prevent local farmers from receiving the full upward impact of the anticipated price rise.


Rabobank’s Dennis Voznesenski

Voznesenski says the ramifications of the conflict on global wheat consumption could result in a change in how we consume and use wheat.

“Globally, the conflict could see both a change in trade flows and usage of wheat,” he says.

“Approximately 160 million metric tonnes of the world’s wheat [20 per cent] is used for feed and this is where substitution is likely to occur to compensate for a potential 60 million metric tonnes of wheat exports annually no longer coming out of the Black Sea region.”

Rabobank also issued a warning for other grain and feed markets which could be impacted, including canola, barley, sunflower seeds and sunflower oil.

Ukraine is the world’s third largest exporter of canola and barley, while Russia and Ukraine are the world’s biggest producers and exporters of sunflower seeds and oil.

Ukrainian corn was also meant to account for 17 per cent of global production this year, but about 15 million tonnes has so far been left unexported.

If they are not available, Voznesenski predicts feed buyers will turn to feed barley instead, helping push Australian feed barley prices higher.

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