Recent attacks on cargo vessels in the Black Sea are raising concerns about the potential impact of further disruptions on global grain prices.

Ukraine accused Russia last week of intensifying attacks on shipping in the Black Sea, with President Volodymyr Zelenskyy denouncing what he described as a renewed Russian blockade of grain exports from the region.

The Black Sea remains a crucial route for global grain trade, and accounts for around 70% of Ukrainian exports.

Moscow, meanwhile, has accused Ukraine of increasing attacks this month in the Sea of Azov, a route that handles around a quarter of Russia’s grain exports.

In a statement on Tuesday, the Ukrainian Agri Council (UAC) warned that the suspension of vessel calls at its Black Sea ports could leave up to 32.4 million tonnes of surplus production on the domestic market, pushing prices below production costs.

The situation is reviving memories of 2022, when Russia’s blockade of the Black Sea triggered a spike in grain prices, particularly across the Middle East and North Africa, regions heavily dependent on Ukrainian grain imports.

Fears of price surge

The current tensions in the Black Sea are already affecting wheat and maize prices, according to Sébastien Abis, a researcher specialising in food geopolitics at the French Institute for International and Strategic Affairs (IRIS).

Those tensions come on top of disruptions to key maritime routes in the Middle East, including recent attacks by Yemen’s Houthi rebels on shipping in the Red Sea. Additional uncertainty surrounds the Panama Canal, Abis added, where drought conditions have reduced water levels, placing further pressure on global maritime logistics.

Still, Petit doesn’t expect shocks comparable to 2022, at least in the medium term. “The harvest took place earlier this year,” he explained, adding that stocks in producing countries remain relatively high.

Abis argues that while existing stocks have helped contain price volatility, they are not unlimited. “Many producing countries have drawn down their reserves,” he said, adding that “there is not a huge margin between global cereal production and consumption.”

What about EU prices?

For producers in the eastern region of the EU, memories of the 2022 crisis are raising a different concern: not higher prices, but the risk of falling prices.

In 2022, after the EU established “solidarity lanes” to help Ukrainian agri-food products find alternative export routes following the disruption of Black Sea shipping, grain accumulated in neighbouring countries, including Poland, Romania, Bulgaria, Hungary and Slovakia, pushing local prices down and fuelling political tensions.

This time, however, Ukrainian producers say they are better prepared to manage a similar crisis.

“We don’t want tensions with our neighbours and partners,” Bobitski said.

“We now have experience in managing these risks, and we have tested alternative routes,” he added, referring in particular to the Danube route.

Bobitski recalled that in the first eight months of 2023, Ukraine was able to establish alternative routes and transport almost 2.4 million tonnes of cereals via the river.

These alternative routes will increase shipment expenses, but another key difference is that Ukraine has boosted its storage capacity, which is now sufficient to hold grain for the next harvest, he explained. The storage system is also decentralised, making it more difficult to target and destroy, he added.

According to Abis, Ukraine’s current storing capacity is difficult to assess, but if stock levels remain strong, this could help ease market concerns.

(adm, aw)