Global wheat trade faces challenges amidst security concerns and shifts in shipping routes

18 January 20244 min reading

In response to recent attacks on cargo vessels in the Red Sea and the Gulf of Aden, the International Grains Council (IGC) and the World Trade Organization (WTO) jointly released insights from their monitoring dashboard, revealing significant shifts in international wheat maritime trade flows. The data indicates a drop in total grains and oilseeds volumes transiting via the Suez Canal, with companies increasingly rerouting cargoes via southern Africa or alternative routes.

After a robust start to the 2023/24 marketing year, world seaborne wheat imports have consistently fallen short of last season's volumes since September 2023. The dashboard reveals a temporary upturn in export prices and delivery costs in early December 2023, impacting overall buying interest. Cumulative deliveries through mid-January 2024 were estimated to be marginally below last season, compared to a 13% year-on-year increase four months prior.

The UN Security Council passed a resolution on January 10th, condemning, 'in the strongest terms,' the multiple attacks by the Houthis off the coast of Yemen. These attacks have disrupted global trade and raised fears of further spillover from the conflict in Gaza. The Houthi movement, which controls much of Yemen, has carried out over two dozen separate attacks on international shipping in response to Israel’s offensive in Gaza.

Security concerns have led to a surge in re-routed vessels since January, aiming to avoid the Suez Canal. Despite this, the available data suggests no major impact on total deliveries to Asia or Eastern Africa as of the latest reporting.

The dashboard highlights a decline in total grains and oilseeds shipments via the Suez Canal, dropping from 7.2 million tonnes in November 2023 to 5.9 million tonnes in December. This decline is attributed to a drop in US soybean shipments, influenced by seasonal factors and adverse weather conditions at some Black Sea ports. The December volume was approximately one-fifth lower year-on-year and 15% below the three-year average.

January witnessed a sharper drop in transits via the Suez Canal, with a total of around 0.9 million tonnes, down threefold year-on-year and 63% below the three-year average for that period. The initial impact on wheat was somewhat muted in December 2023, with transits via the Suez Canal edging 0.2 million tonnes higher from the previous month, reaching 2.6 million tonnes, up by 16% from the three-year average. However, flows plunged in the first half of January, estimated at 0.5 million tonnes, almost 40% lower year-on-year and one-quarter below the average.

For wheat shipments from the EU, Russia, and Ukraine to selected Asian countries and Eastern Africa, typically passing through the Suez Canal, total shipments during December of 2.4 million tonnes broadly matched last season. Notably, around 8% was delivered via alternative routes, up from a normal share of just 3%. The share of alternative routes surged to 42% during the first half of January, with around 0.3 million tonnes transported avoiding the Canal out of the total 0.8 million tonnes.

From the start of December to mid-January, approximately 0.5 million tonnes of wheat from the EU, Russia, and Ukraine to Asia and Eastern Africa was transported via alternative routes, constituting 16% of the total 3.3 million tonnes. This represents a significant increase from just 50,000 tonnes one year ago.

Despite the surging number of diversions, the impact on total deliveries from the EU, Russia, and Ukraine to Asia and Eastern Africa has been limited to date. Although volumes have eased in recent weeks, all-route shipments held up well compared to previous years. Deliveries in the first half of January of 0.8 million tonnes broadly matched the volume over the same period a year ago.

Individual exporters have witnessed shifts in shipping routes, with shipments via alternative routes from the EU totaling 330,000 tonnes, mainly from France, Romania, Lithuania, and Latvia. In the case of the Russian Federation, around 190,000 tonnes have been diverted via alternative routes over the same period, compared to zero one year ago. Notably, all shipments from Ukraine to the designated Asian and Eastern African countries continued to transit via the Suez Canal during December and January.

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