Interview by: Svitlana Synkovska

In an insightful interview with Miller Magazine, grain market observer at Fastmarkets, Masha Belikova sheds light on the factors influencing Ukraine’s wheat export strategies, the impact of European crop shortages, and the complexities of maintaining stable trade routes amid geopolitical tensions. This interview also offers a timely exploration of the forces shaping the future of grain markets, just ahead of the pivotal discussions set for Global Grain Geneva in November.

Masha Belikova
Editor | Fastmarkets

Regarding the main destinations for Ukrainian wheat this year, Belikova highlighted Spain, Egypt, Indonesia, Vietnam, and Algeria as key buyers. In Europe, despite reduced crop estimates, the market is influenced more by overall supply than by demand. Buyers, especially in Asia, see the supply from the Black Sea region, including Russia, as sufficient, leading to some holding off on purchases in anticipation of further price drops.  

On the logistics side, Belikova noted that Ukraine’s grain export situation has improved compared to the previous two years. Ports are functioning more autonomously, and although the crop is smaller this year, port capacity remains adequate. There is potential for transshipment costs to decrease later in the season. However, internal challenges, such as a potential shortage of truck drivers due to mobilization, could impact domestic logistics, though companies are actively seeking solutions.

The upcoming Global Grain Geneva conference in November will be a key opportunity to discuss these developments in detail and analyze market trends for 2024/25. “It’s going to be a pivotal moment to see where the markets are headed,” she stated.

Good day, Masha. It’s great to talk with you. Let’s dive into the Ukrainian wheat harvest. Can you provide us with some insights into this season's early harvest? How have weather conditions impacted the crop?

Certainly, Svitlana. The wheat harvest in Ukraine is already complete, and we've actually harvested more than initially expected—21.7 million tonnes. This is in line with last year’s number or even 100,000 tonnes higher. The average yield is also solid at 4.5 t/ha, despite the dry weather and heat in May and July, which raised concerns about production. However, the quality appears to be slightly better than last year, with feed to milling wheat ratios estimated at 60/40%. So, overall, it's a positive outcome.

That’s really good news. What are the primary destinations for Ukrainian wheat this year? Given the reduced crop in the EU, do you think Ukrainian wheat will see increased demand in European or other markets?

That's a great question, and it's a bit complex. In the first two months of the new grain season, the main destinations for Ukrainian wheat are Spain, Egypt, Indonesia, Vietnam, and Algeria. Spain, for example, was a major destination last year as well, primarily buying feed wheat from Ukraine because it's currently relatively cheaper than corn. However, Spain is expected to have a good crop of wheat and barley this season, so their demand might not increase.

As for North African buyers like Egypt and Algeria, they typically purchase the cheapest available wheat, which, at the moment, is Russian. Indonesia and Vietnam are showing more interest this year, which is a shift from last year when concerns about the Grain Deal kept them cautious. This year, traders are more confident in the stability of Ukrainian exports through the Black Sea, which has allowed them to plan better. However, the global market remains quite unpredictable, so forward contracting has been limited.

Regarding Europe, despite lower crop estimates, the current market is still driven by the overall supply picture, which isn't as dire as it might seem earlier. Some buyers are holding off, expecting prices to drop further, influenced heavily by the Black Sea region's pricing dynamics.

Why are we seeing low prices in the EU despite all the bullish news about crop shortages?

Many are focused on production volumes rather than demand. In the past few years, we've seen a "hand-to-mouth" buying approach in many countries. Despite some concerning crop news from places like France, many buyers - especially in Asia - believe that overall supply, particularly from the Black Sea region, remains sufficient. As a result, some are betting that prices can drop further and are holding off on purchases. The Black Sea region, particularly Russia, is currently setting the price.

Could you explain what happened with Turkey’s wheat imports this summer?

Every year, Turkey tries to protect its domestic wheat producers, typically introducing import restrictions around June or May. This year, they implemented a total ban on imports starting June 21, which will last until October 15th. This decision was likely influenced by expectations of a strong domestic crop and high stocks. This ban has significantly impacted prices in the Black Sea region, especially as it came just before the new crop arrival. Thus, prices for Russian 12.5% protein wheat and Ukrainian 11.5% protein wheat dropping notably within a month of the announcement – almost by $30 usd per tonne. 

At the Global Grain Geneva conference this November, when you present, we should have more clarity on Turkey’s grain import plans for 2024/25.

Absolutely. As the ban for now is only until October 15, in mid-November it will be already clearer if the ban is extended or it’s over, thus the impact from that also expected to be seen. Plus, we also expect to have a clearer picture of what's happening with other major importers like Bangladesh, which is currently dealing with significant social and political instability. Last year, Bangladesh was one of the biggest destinations for Black Sea wheat. 

Agriculture is never boring, but in the past couple of years, it’s been even more challenging. In just a few months, the landscape can change entirely. I’m sure your presentation in November will be extremely insightful, especially considering the upcoming U.S. elections.

Yes, the U.S. elections will indeed be a major factor, likely impacting currency markets in many countries. We're currently seeing signs of financial improvement in key markets, Egypt in particular, which is now buying grain, in smaller shipments(coasters). The potential return of Turkey to the market could push prices higher, so November will be an interesting time to analyse the trends.

Finally, let’s wrap up with logistics. Ukrainian grain exports have faced significant challenges over the past two years. With ports now functioning almost normally, do you foresee any ongoing logistical issues this season?

Compared to last season, the situation has improved significantly. We no longer depend on the Grain Corridor deal, making Ukrainian ports more autonomous. While the overall crop is smaller this year, port capacity is sufficient, and there’s potential for transshipment costs to decrease later in the season. Also, the Danube ports are less busy than they were last year. Regarding exports through Constanța, some Ukrainian exporters still rely on Romanian ports, particularly for markets like South Korea and Thailand, which do not allow the loading from the Ukrainian ports, but also looking for Ukrainian origin import.  

Internal challenges in Ukraine, such as a potential shortage of truck drivers due to mobilization, could also impact domestic logistics, but companies are actively seeking solutions.

GLOBAL GRAIN GENEVA TO HIGHLIGHT MARKET TRENDS

Thank you, Masha. We’re looking forward to your market updates on the Black Sea grain markets in Geneva on November 13th. This year’s Global Grain Geneva is set to be the largest annual event for the grain and agri commodities industry, with over 850 senior professionals expected to attend. It promises to be three days of networking, deal-making, and critical market insights. As traditional trade routes continue to face disruptions, and weather impacts crop yields, gathering with market leaders will be essential to navigate the challenges and opportunities of 2024/25.

I'm really excited for the event and looking forward to discussing these market developments in Geneva. It’s going to be a pivotal moment to see where the markets are headed.