Key facts
- Russia and Ukraine have intensified attacks on ports and shipping in the Black Sea region.
- Ukrainian drone attacks have reportedly affected tanker vessels and bulk carriers in the Sea of Azov.
- Russia has reportedly closed the Azov-Don Canal and the Kerch Strait, impacting its own grain logistics.
- Global wheat prices have risen, with Russian wheat prices increasing by approximately $10 per tonne.
- Ukrainian agricultural exporter Kernel suspended operations after its Port of Chornomorsk facilities were damaged.
- Ukraine's grain export capacity through its Black Sea ports has been reduced by about one-third.
- Some shipowners are refusing to call at Ukrainian ports due to security risks.
The Black Sea grain market is in turmoil following a sharp escalation in attacks by Russia and Ukraine over the past week, targeting ports, export infrastructure, and commercial shipping. These disruptions are occurring at the peak of the harvest season, threatening global food security.
Ukrainian forces have reportedly used drones to target tanker vessels in the Sea of Azov, with bulk carriers also affected. This has led to market rumors of the closure of the Azov-Don Canal and the Kerch Strait by Russian authorities, which would prevent vessels from entering the Sea of Azov. While no official confirmation was issued, vessels already in port were reportedly allowed to discharge but not leave. The Sea of Azov ports account for approximately 19% of Russia's wheat exports, with annual shipments around 9 million tonnes. However, export activity has been subdued recently due to a lack of demand from Türkiye. Market participants believe the immediate impact of port closures on export volumes may be limited, but a prolonged disruption could force vessels to shift to other Black Sea ports, complicating inland deliveries already affected by fuel shortages.
Russia's intensified attacks have also targeted Ukraine's Black Sea ports, grain and vegetable oil terminals, and grain-carrying vessels. Ukraine's largest agricultural exporter, Kernel, announced the suspension of its operations after its facilities at the Port of Chornomorsk sustained damage, including to terminal equipment, power lines, and grain storage. Approximately 45,000 tonnes of wheat and 9,000 tonnes of sunflower oil were affected. Further damage to a vegetable oil terminal impacted an additional 25,000 tonnes of sunflower oil. Several other terminals were also reportedly affected, and casualties, including fatalities, were reported among crew members on vessels.
Ukraine's Deputy Economy Minister Taras Vysotskiy stated that the country will do everything possible to protect its Black Sea seaports and maintain grain exports at least at last season's level, despite the intensified Russian attacks. However, the attacks are disrupting commercial shipping, with some shipowners refusing to call at Ukrainian ports and traders suspending grain purchases due to rising security risks. Ukraine's main farmers' union estimates that the country has lost about one-third of its grain export capacity through its key Black Sea ports. Four of Ukraine's 13 major grain export terminals have suspended grain purchases, and at least one terminal has stopped export loading. Some shipowners are refusing to enter Ukrainian ports, and existing bookings are being reviewed or cancelled.
The escalation of conflict has pushed global wheat prices higher, particularly for milling wheat, as Russia is the world's largest exporter of this commodity. Offers for Russian wheat with 12.5% protein rose by around $10 per tonne between July 9 and July 15, reaching approximately $240 per tonne.