logistics industry

Ukraine shuts down ports as conflict threatens grain supplies

Reuters
Ukraine shuts down ports as conflict threatens grain supplies

PORT. Russian Navy vessels are anchored in a bay of the Black Sea port of Sevastopol in Crimea, May 8, 2014.

Reuters

(1st UPDATE) Russia and Ukraine account for 29% of global wheat exports, 19% of world maize (corn) supplies, and 80% of world sunflower oil exports

MOSCOW, Russia – Ukraine’s military has suspended commercial shipping at its ports after Russian forces invaded the country, an adviser to the Ukrainian president’s chief of staff said, stoking fear of supply disruption from the leading grain and oilseeds exporters.

Russia earlier suspended the movement of commercial vessels in the Azov Sea until further notice, but kept Russian ports in the Black Sea open for navigation, its officials and five grain industry sources said on Thursday, February 24.

Ukraine is a major exporter of corn (maize), much of it destined for China and the European Union. It also competes with Russia to supply wheat to major buyers such as Egypt and Turkey.

Egypt’s state grains buyer canceled an international purchasing tender for wheat on Thursday as the crisis led to reports that no offers of either Russian or Ukrainian wheat had been received.

Russian forces invaded Ukraine on Thursday in a massed assault by land, sea, and air, the biggest attack by one state against another in Europe since World War II.

“The market is still struggling to get a clear picture about the actual military situation on the ground. The ports in the Azov and Black Sea so far seem not to have been damaged according to the initial shipping agency reports,” one European grain trader said.

The trader said the market was looking out for any declarations of force majeure, meaning suppliers will not fulfill contractual obligations because of extreme circumstances.

Shipping group Maersk said on Thursday it has halted all port calls in Ukraine until the end of February and has shut its main office in Odessa on the Black Sea coast, because of the conflict.

Russia, the world’s largest wheat exporter, mainly ships its grain from ports in the Black Sea.

The Azov Sea’s ports are shallower and have less capacity.

Maripol, one of the biggest Ukrainian ports in the Azov Sea, mainly handles relatively small ships of between 3,000 and 10,000 tons deadweight.

The Azov Sea ports export wheat, barley, and corn to Mediterranean importers including Cyprus, Egypt, Italy, Lebanon, and Turkey.

Another European trader, speaking on condition of anonymity, said such countries would have to seek alternative supplies if the ships were unable to depart in the near future.

Wheat prices in Chicago rose to the highest level in nine and a half years on Thursday as the conflict threatened to disrupt the flow of supplies from the region while European wheat futures climbed to a record peak.

Russia and Ukraine account for 29% of global wheat exports, 19% of world maize (corn) supplies, and 80% of world sunflower oil exports.

Russia produced 76 million tons of wheat last year and is expected by the US Department of Agriculture to export 35 million tons in the July-June season, 17% of the global total.

Russia supplies wheat to all the major global buyers. Turkey and Egypt are the largest importers.

Ukraine asked Turkey to close the Bosphorus and Dardanelles straits to the Russian ships, the Ukrainian ambassador to Ankara said earlier on Thursday.

Turkey’s President Tayyip Erdogan said on Thursday he backed Ukraine’s territorial integrity but there was no immediate response to Kyiv’s request.

Under a 1936 pact, Ankara has control over the straits and can limit the passage of warships in wartime or if threatened. – Rappler.com