Mixed signals in grain trades as Ukraine corridor renewal looms

The existing agreement, brokered by the United Nations and Turkey in July last year and renewed in November, is due to run until 18 March. But extension of the Black Sea Grain Initiative (BSGI) is by no means certain. Russia has indicated that it wants restrictions on its own grain exports to be lifted for the BSGI to be extended.

Ukraine needs stored grain to be exported so make space in silos for this year’s produce. The European Commission estimates that Ukraine accounts for 10% of the world’s wheat market, 15% of its corn transactions, and 13% of its barley production. 

In normal times, grain exports from Russia and Ukraine provide a huge volume of basic foods consumed in many countries around the world, contributing to vital staple food and cooking oil supplies. Meanwhile, grain cargoes from Black Sea ports are a key source of business for many bulk carrier owners.

However, although the UN-brokered deal has allowed exports to continue, volumes have been significantly lower and have fallen every month since the October peak. Reduced grain shortages are said to have contributed to food shortages in many heavily reliant countries and major increases in food prices in other regions.

There are mixed signals for shipowners. The end of China’s long-drawn-out lockdown has stimulated demand for grain restocking, brokers report, and South America’s grain harvests are exceeding expectations. Meanwhile, buyers are lining up for relatively cheap Russian produce and there are unsold stocks of grain in the US.

Related:Industry unites in call to evacuate seafarers trapped by Ukraine war

The fleet of smaller bulkers most frequently deployed in the shipment of grain cargoes consists of many older ships. These are expected to fare badly under the IMO’s new carbon regulations, in place since 1 January. Many are expected to use engine power limitation, reducing ship speed, as a compliance strategy, but a significant number of older ships are thought likely to be phased out. 

The Baltic Exchange Dry Index has risen sharply from its mid-February low of 525, adding another 2% from yesterday to close at 1327.