Redirecting Ukraine’s wheat exports to the western border makes little economic sense — analysts

Ukraine’s agricultural export market is rapidly shifting toward the Danube route following Russian strikes on the ports of Greater Odesa. Some traders have also attempted to redirect wheat exports by rail through the country’s western border, but this route remains economically inefficient for wheat, according to analysts at White Brokers.

According to the brokerage, as of Friday, prices in the Danube ports stood at around $195/t DAP port for feed wheat and $200/t DAP port for Class 3 milling wheat. Russian attacks are making the situation increasingly difficult for producers, as the harvest campaign has only just begun while substantial carry-over stocks from the previous season remain on the market. Without the reopening of Ukraine’s deep-sea ports, pressure on domestic prices is expected to intensify in the coming weeks.

As a result, Ukraine’s wheat market experienced a sharp decline in trading activity this week. By the end of the week, purchase prices at deep-sea ports had effectively disappeared, as traders had almost completely suspended procurement.

“Following attacks on port infrastructure and civilian vessels, the market has entered a period of uncertainty. Many traders have encountered difficulties fulfilling contracts because shipments cannot be loaded, while shipowners have started refusing to position vessels for loading,” White Brokers said.

In the near term, downward pressure on global wheat prices is expected from:

• the start of the harvest in the Northern Hemisphere;
• strong competition, with low-priced offers from some exporters continuing to pressure international tenders;
• favorable crop prospects across Europe.

Factors supporting wheat prices include:

• logistical disruptions in the Black Sea and Azov Sea;
• lower wheat production in the United States;
• inflationary risks;
• geopolitical and logistics risks, as tensions in the Middle East, particularly around Iran and the Strait of Hormuz, continue to increase freight costs and threaten supply chains;
• weather conditions in Europe.