Key facts
- Global wheat buyers face higher costs due to the ongoing Russia-Ukraine war disrupting Black Sea supplies.
- Benchmark Chicago wheat futures have risen 40% from June lows to a three-and-a-half-year high.
- Russian wheat exports are expected to be around 1 million tons in September, down from 5 million tons last year.
- Ukraine's wheat exports are projected at 1 million tons for September, half of last year's level.
- Indonesian millers are paying 20-25% more for Australian wheat compared to previous Black Sea purchases.
- Egyptian wheat imports in early September were significantly lower than a year ago, with a shift towards European suppliers.
Global wheat buyers are facing significantly higher costs as the ongoing conflict between Russia and Ukraine continues to disrupt crucial Black Sea grain shipments. Attacks on vessels and port infrastructure since July have brought cargo movements to a near standstill, triggering a rally in prices. Benchmark Chicago wheat futures have climbed 40% from June lows to a three-and-a-half-year high, and physical prices from alternative exporters have surged.
Top wheat importers in Asia, the Middle East, and Africa have been finding it difficult to secure supplies. Many have held off making alternative purchases, hoping for a grain shipment agreement, but local supplies are dwindling, particularly in import-dependent Asia. Competition for available cargoes is expected to intensify until the Southern Hemisphere harvest begins later in the year, with prices likely to rise further in the interim.
Russian wheat exports are on track to decline to around 1 million tons in September from 5 million tons last year, while Ukraine is expected to ship about 1 million tons this month, half of last September's levels, according to Kpler estimates. This crunch is expected to impact Asia the most in the near term, with little to no wheat heading to the region from the Black Sea.
Indonesia, the second-largest global importer, has received only about 60,000 tons from the Black Sea this month, a sharp decrease from half a million tons last September. Indonesian millers are turning to suppliers like Argentina and are paying around 20% to 25% more for Australian wheat than they previously paid for Black Sea cargoes. Some are opting for smaller shipments to manage the immediate tightness and high costs, as they cannot pass the full cost increase to flour buyers.
Black Sea wheat from Romania is currently quoted around $340 per ton C&F to Southeast Asia, and Australian Premium White wheat is around $345 per ton for October shipment, approximately 25% higher than pre-crisis Black Sea wheat prices. Top global buyer Egypt is scheduled to receive less than a tenth of the volume it received from Russia and Ukraine in the September-to-October period last year. While harvests in the Middle East and North Africa offer some breathing room, it is not enough for the full season. Egyptian wheat imports in the first half of September dropped to 143,870 tons from 876,139 tons a year ago. The country is diversifying its sources to France and other European suppliers, though some Egyptian buyers are hesitant due to preferences for familiar wheat varieties and existing domestic supplies. Many mills in Egypt are operating at reduced capacity, awaiting potential price drops if Black Sea shipping is restored.