Saturday, December 9, 2023

Russian aggression will be felt in NZ wheat prices

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Collapse of Black Sea grain agreement likely to affect grain import prices.
The recent rise in wheat import prices is the result of Russia attacking grain transport infrastructure in Ukraine.
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Rabobank is warning that a recent spike in the global price of wheat will likely impact New Zealand import grain prices.

The rise in prices comes after Russia bombed Ukrainan ports and warned that all vessels travelling to Ukraine’s Black Sea ports will be considered carriers of military cargo.

The developments led to an 8% lift in CBOT (Chicago Board of Trade) wheat prices, the highest trading level of CBOT wheat since a spike in mid-June and one in February, Rabobank senior grains analyst Dennis Voznesenski said.

Voznesenski said the rise in overseas wheat prices will likely have a direct impact on NZ wheat import prices.

“The reduced availability of grain from Ukraine has short- and long-term implications for the global grain sector.

“In the short term, it means less export availability – and during an important time period, Black Sea harvest, when the world relies on Ukrainian grain.

“In the long term, it means more grain stockpiled in Ukraine, which leads to lower Ukrainian prices, lower Ukrainian farm margins and lower planting,” he said.

As of July 20, CBOT wheat is trading at 725USc/bu (or NZ$423/tonne).

The latest price spike followed “a barrage of missile attacks on Ukrainian grain port infrastructure and Russia’s announcement that the flag countries of vessels travelling to Ukraine’s Black Sea ports will be considered involved in the Ukrainian conflict on the side of the Kiev regime – dashing hopes of external entities protecting Ukrainian vessels”.

Voznesenski said information coming out of the region indicates that Ukrainian grain export terminals and grain storage facilities on the Black Sea have been targeted and hit by Russia, including the largest port, Odessa.

Following Russia’s withdrawal on July 17 from the Black Sea Grain Initiative that had allowed safe passage of vessels carrying grain exports from Ukraine’s Black Sea ports, there were initially hopes that third party countries would be able to escort and guarantee the safety of Ukrainian grain vessels moving through the Black Sea. 

However, Voznesenski said, this has become very unlikely, “with NATO countries so far resisting the risk of a possible – and significant – escalation of the conflict”.

Federated Farmers arable vice-chair Andrew Darling said the lift in prices will be positive for New Zealand growers.

“If the price is going up for the grower, that’s not a bad thing.”

Although around 50% of grain used in NZ across the spectrum is imported, mostly from Australia, fortunately the latest development has come during the winter months when there is little market activity in NZ.

It is difficult to know exactly what effect it will have for growers over the course of the season this far out, he said.“There are so many factors at the moment.”

The news will not be welcome for consumes already battling elevated food prices, he said.

“It’s all got to be passed on to the consumer.”

This article has been updated to include comment from Federated Farmers.

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