Milling & Baking News - August 8, 2023 - 10

TUES | 08 08 202 3
EU accuses Russia of weaponizing
food 'to create new dependencies'
KANSAS CITY - Having directly targeted
and damaged Ukraine grain assets
at Black Sea ports and on the Danube
River since withdrawing from the Black
Sea Grain Initiative on July 17, Russia
has sent Ukraine and the entire world a
chilling message, said Stephen Nicholson,
global sector strategist, Grains & Oilseeds,
at Rabobank.
" It reemphasizes to me that Russia has
made a clear decision that it is going to
use food as a weapon, politically, economically
or whatever the case may be, " Mr.
Nicholson told World Grain, a sister publication
of Milling & Baking News.
The European Union, in a letter
obtained by Reuters, recently warned
developing countries and G20 members
(composed of the world's largest economies)
that Russia is offering cheap grain
" to create new dependencies. "
" As the world deals with disrupted
supplies and higher prices, Russia is now
approaching vulnerable countries with
bilateral offers of grain shipments at discounted
prices, pretending to solve the
problem it created itself, " the letter said.
" This is a cynical policy of deliberately
using food as a weapon to create new
dependencies by exacerbating economic
vulnerabilities and global food insecurity. "
The recent assault on Ukrainian grain
terminals along the Danube River, the longest
river in the European Union by length
and volume, is particularly worrisome,
Mr. Nicholson said, since the bombings
occurred very close to Romanian soil.
The risk of the war widening into a much
broader conflict has increased since Russia's
decision to pull out of the grain deal.
" That's getting very close to NATO territory, "
he said.
Exports from the inland ports along the
Danube River have grown in importance
after the end of the grain initiative, which
had allowed Ukraine to ship 33 million
tonnes of agricultural products via the
Black Sea for nearly a 12-month period
during the war, now in its 18th month. In
the past year, Ukraine, which in recent
10
MILLING & BAKING NEWS
years has been a top global exporter of
wheat and corn, has increased annual
grain shipments on the Danube from a
few hundred thousand tonnes to 2 million,
according to the Ukrainian Grain
Association, which noted that there is
potential to double that figure.
There are four ports along the Danube
River in Ukraine: the Port of Izmail,
which was attacked last week, leaving
storage units and at least 40,000 tonnes of
grain damaged; the Port of Reni; the Port
of Ust-Dunaisk; and the Port of Kilya. The
river connects Ukraine to the Black Sea
and eight other European nations.
" These are substantial facilities, not a
couple of grain bins and a leg, " Mr. Nicholson
said. " These are the kind you see
in western Europe - big complexes with
significant tonnage. "
He noted that in 2021-22, more than
90% of Ukraine's wheat, barley and corn
exports were shipped through the Black
Sea. With Russia blockading the Black
Sea ports during the first five months of
its invasion, Ukraine redirected its shipments
in 2022-23, with only 65% of wheat
and corn and 50% of barley exported
through the Black Sea.
" They certainly diversified their shipping
abilities pretty quickly, " Mr. Nicholson
said.
With grain exports from the Black Sea
essentially halted and terminals on the
Danube now under siege, potentially limiting
shipments, the next best alternative
is rail. But export volumes by that mode
of transportation are limited by higher
shipping costs and not having uniform
rail gauges throughout Europe.
Russian President Vladimir Putin
recently assured African leaders that he
would supply them with the grain they
needed in the coming months, but industry
analysts are skeptical about Russia's ability
to make good on that promise. Although
Russia, in theory, has control of the Black
Sea shipping lanes and can ship grain by
rail east to China and Southeast Asia, several
issues will weigh on its ability to maxiPort
of Izmail, along the Danube in Ukraine
mize exports, Mr. Nicholson said.
" Freight and insurance costs are going
to be higher because they are shipping
in a war zone, " he said. " Also, the Russian
ports on the Sea Azor don't have the
capacity that Ukraine ports have on the
Black Sea. "
He added: " Ukraine has 48 million
tonnes of shipping capacity (at its seaports);
Russia has 42 million. But it's
spread out of 12 different ports, almost
all of them smaller compared to Ukraine,
which has six ports, most of them large. "
So with Ukraine's grain production and
export capacity dwindling, how will the
world be impacted if this conflict continues
to drag on for weeks, months or even
years? The International Grains Council,
in its most recent report, noted that global
wheat carryover stocks are projected to
fall by 7% in 2023-24, to a five-year low of
263 million tonnes, as Ukraine, Australia,
China, Russia and possibly India are anticipating
smaller crops.
" If you look at the world's major wheat
exporters, and you take out Ukraine and
Russian stocks and look at their exports,
there's not enough wheat stocks in the
world to fill that void, " Mr. Nicholson said.
" It's just the opposite with corn. As of now,
there is enough corn stocks among the
world's major exporters to make up for
the loss of Ukraine corn. Is that sustainable
long term? In both cases, likely not.
But there is a lot more concern over the
supply of wheat than there is corn. " MBN
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Milling & Baking News - August 8, 2023

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