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Ukraine shuts ports as conflict threatens grain supplies

25 February 2022

Ukraine is a major exporter of corn to China and the EU

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 leading grain and oilseeds exporters, reported Reuters.

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

Global farm commodities trader Cargill Inc said an ocean vessel it chartered was "hit by a projectile" on the Black Sea, but that the ship remained seaworthy and all crew were safe .

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.

Industry estimates currently put Ukraine's grain exports at about 5 million to 6 million tonnes a month, comprising about 4.5 million tonnes are corn, 1 million tonnes of wheat and a remaining share of mainly barley.

Main grain export ports include Chornomorsk, Mikolayiv, Odessa, Kherson and Yuzhny.

Egypt's state grains buyer cancelled an international purchasing tender for wheat on Thursday amid 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 Two.

"The market is still struggling to get a clear picture of 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 fulfil contractual obligations because of extreme circumstances.

Shipping group Maersk said on Thursday it had 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.

Global agricultural commodities trader Bunge Ltd BG.N said Thursday it had shuttered company offices in Ukraine and operations in its Black Sea grains port in Nikolaev, Ukraine, had been suspended. Competitor Archer-Daniels Midland Co said its Ukraine facilities, including an Odessa export terminal, were not operating.

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.

Mariupol, reported to be under attack from Russian forces, one of the biggest Ukrainian ports in the Azov Sea, mainly handles relatively small ships of between 3,000 to 10,000 tonnes 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.

US wheat futures rose to the highest level in nearly a decade 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) exports, and 80% of world sunflower oil exports.

Russia produced 76 million tonnes of wheat last year and is expected by the US Department of Agriculture (USDA) to export 35 million tonnes 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 on Thursday to close the Bosphorus and Dardanelles straits to Russian ships, the Ukrainian ambassador to Ankara said. 

Turkish President Tayyip Erdogan said he backed Ukraine's territorial integrity but there was no immediate response to Kyiv's request. 

Under the 1936 Montreux Convention, Ankara has control over the straits and can limit the passage of warships in wartime or if threatened.

Source: Reuters



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