Conflict and politics in Eastern Europe threaten wheat shipments

New contract lows in Chicago wheat futures this week are hardly indicative of global supply concerns, but traders might want to eye what's happening in the Black Sea region more closely.

Winter grains in top wheat exporter Russia are in the worst-ever condition, and Ukraine’s current shipping capabilities could soon come under threat. Russia and Ukraine accounted for a third of global wheat exports last marketing year.

Ukraine’s agricultural exports have faced challenges ever since Russia invaded the country nearly three years ago as port infrastructure has been a prime target for attacks. This forced Ukrainian grain exporters to seek an alternative route through Romania’s Constanta port on the Black Sea.

The frontrunner for Sunday’s Romanian presidential runoff has suggested halting Ukrainian grain exports out of his country if elected. The move could be popular with Romanian farmers, who have previously protested the transit of Ukrainian farm goods to preserve local markets.

It is unclear whether this ban is likely or even possible, but Ukraine’s involvement has had some positive economic impacts. Overall traffic of goods at Constanta in 2023 surged 22.5 per cent on the year, largely owing to ongoing European Union-funded infrastructure projects.

But it could be problematic if Ukraine lost Constanta as an outlet under a worst-case scenario. Constanta handled 14 million metric tons of Ukrainian grain in 2023, accounting for roughly 30 per cent of Ukraine’s total grain exports that year.

For the 2024-25 marketing year that began July 1, Ukraine’s wheat exports are seen falling 14 per cent from the previous year. However, Ukrainian grain exports from Constanta in the first 10 months of 2024 have dropped 52 per cent on the year as Ukraine has increased reliance on its own seaports.

This dampens the impact of a potential Constanta loss, but the continuing war with Russia means that threats to Ukraine’s seaports never completely vanish. Luckily for Ukrainian exporters, they had shipped half of the government-agreed wheat export volume for 2024-25 as of November 13.

(By Karen Braun. Editing by Sonali Paul)