EVEN MORE AMAZINGLY, RUSSIA AND UKRAINE WERE ON TRACK TO SUPPLY 78.5% OF THE WORLD’S SUNFLOWER OIL EXPORTS.
Primary concerns in Ukraine are largely related to the ability to sustain production and to export, both new crop and crop from the 21/22 marketing year.
Ukrainian ports have been shut since the 28th February 2022 since the start of the invasion. At the time of writing, the ports of Mariupol and Mykolaiv have fallen under Russian control with an anticipated invasion of Odessa imminent. Once the conflict eases and an agreement is reached, how long this will be is open to debate currently, but there will also be the issue of infrastructure capability and damage. There may also be an element of hesitancy from for ship owners and insurers to send vessels into Black Sea ports, especially if they end up under Russian control. Ukraine reportedly still has around 6 – 8Mmt of grains to export this season before the end of June which may prove tricky.
Production could also be effected. Disruption in the supply of key inputs such as fuel, chemicals and fertilisers could result in lower yields due to the lack of application or lack of supply when harvest starts in June/July 2022. If the conflict continues, then there will be questions in regards to the extent of the harvest. A large predicament remains regarding the spring crop as planting is due to start at the beginning of April and if things do not improve, there will undoubtably be a downside impact upon corn and sunflower plantings.
Source: USDA, ING Research
Concerns toward Russia fall in the area of Russian imposed sanctions to counter the Western sanctions that have been implemented. The Kremlin have announced that there will be sanctions imposed on commodities which will be a further hit to the trade. Western companies are also shunning Russian supply due to political pressures. Rising food prices and the importance of food security cannot be overlooked at these times where food inflation is prevailing across the world.
The crux of the situation is the duration for which the conflict will continue and how it will pan out post fighting. The situation is still very much fluid but a disruption in supply and future impact down the line is still an unknown. Increased plantings and harvest from other countries has been shown by the USDA as a potential offset in supply but for the time being, expect the market volatility to continue. Vladimir Putin has created a global wheat superpower, but how global will it remain?
Dominic Enston E:
dominic.enston@admisi.com T: +44(0) 20 7716 8478
5 | ADMISI - The Ghost In The Machine | Q1 Edition 2022
Chart 3: 2021/22 estimated sunflower seed product export (%)
Chart 1: 2021/22 estimated wheat export split (%)
Source: USDA, ING Research Chart 2: 2021/22 estimated corn export split (%)
Source: USDA, ING Research
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