Russia leaving the Black Sea Grain Initiative this week has several impacts globally. American Farm Bureau Federation Economist Bernt Nelson says the deal, which allows Ukraine to safely export grain, means Ukraine must utilize other ports.
Nelson says; “Ukraine is still the largest producer of sunflower oil, it’s number six in corn, it’s number seven for wheat production, and it uses the Black Sea to primarily move exports. And so, this will force Ukraine to rely on the Danube ports, along the Danube River that borders Romania. Romania is a member of NATO. So, this kind of provides some safety for these ports.”
Those ports were neglected over the years, but Ukraine started investing in them after Russia invaded the country. Nelson; “So, they’ve dramatically increased the capacity of these ports from about one and a half percent capacity to about 20 percent of Ukraine’s export capacity. And these ports should provide a fairly effective route for grain to be moving out of Ukraine. With that being said, by shutting down that Black Sea corridor, it has the potential to decrease Ukraine’s capacity by about 25 million metric tons.”
While the announcement did create some changes in the markets, Nelson says grain markets are still focused on weather. Nelson says; “We did see wheat take quite a jump, but we also saw it come back down. Now, these markets are still really focused on the weather issues. We saw a lot of rain occurring in the Corn Belt over the last two weeks in an area that was dry. And now as we progress through pollination, we’re still seeing really good conditions for corn pollination. And this is really having a lot more of an influence on these market than the news of the Black Sea deal.”