There are large implications in store for Australia’s grains and oilseeds markets, as Russia invades Ukraine in an escalating geopolitical conflict unseen in Europe since the Second World War, according to agribusiness bankers Rabobank.
Rabobank Australia's commodities analyst Dennis Voznesenski has outlined the significance of losing of access to all wheat exports from the Black Sea – accounting for 34 per cent of global markets - for the first time in more than 100 years.
Market Check's Tess Walch foreshadowed potential future benefits for Australia’s wheat exports with increased demand as the world now looks to alternate markets including Australia.
Hear the full interview with Tess Walch on the FlowNews24 podcast player below:
Rabobank estimates that WA Kwinana Free-In-Store APW prices are imminently set to potentially rise from A$367/tonne to A$425/tonne.
Canola, barley and feed markets could also be impacted by the Eastern European conflict. Ukraine sits third behind Australia and Canada in rankings on volume as the world’s largest canola exporters.
The Chicago Board of Trade (CBOT) market, which is considered a key indicator market monitored by all wheat traders, saw wholesale wheat prices rise 45 per cent from October 1914 to February 1915 the last time Black Sea exports were constrained.
Speaking on Flow as the fluid situation in Ukraine develops, Senior Commodity Advisor with Market Check, Tess Walch, outlined how the CBOT safety mechanism kicked in on Thursday:
“Huge movement in the grains market, arguably wheat is probably one of the most affected commodities by this crisis.”
“Yesterday [Thursday] anyone who traded in the wheat markets were watching the Chicago Board of Trade future markets trade to something called 'limit-up' which is the market's run away, there’s a mechanism that halts trading and that doesn’t happen very often.”
“But it did yesterday so lot’s of heat in that market.”
Global grains markets had been pricing risk into forward projections for months as the diplomatic tensions smouldered regarding Ukraine, and Walsh indicated the risk had now materialised:
“The market has been looking for some sort of tangible evidence of supply disruptions out of that region [Eastern Europe] and it really came overnight, so there’s now no exports flowing out of that region until further notice.”
“Russia and the Ukraine have about 13 million tonnes of old crop wheat and about the same of corn to export for the remainder of this season, so the market is pricing demand now, or trying to, out of other origins like Europe, or the US and even us (Australia).”
“Import demand is likely to arise as countries look to secure more wheat in light of further escalation and risk of executing under that region.”