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  • Writer's pictureMarsoft Admin

Kevin Hazel, a Partner at Marsoft, gives the latest Marsoft comment on Ukrainian Grain Exports

After peaking in the 2020/21 crop year at 580 million tonnes, the grain trade has now fallen over the past two years. The latest figures from the International Grains Council show global grain trade volumes (including wheat, coarse grains, and soybeans) dipping to 572 million tonnes over the past 12 months.

At first glance, this might not seem so surprising, given the fact that Ukraine was the world’s fifth largest exporter of grain prior to Russia’s invasion of that country in early 2022. But Ukrainian grain exports have actually held steady over the past two years, at just over 50 million tonnes per year, helped in large part by the Turkish-brokered agreement that has allowed these exports to flow relatively unimpeded.

Looking ahead, the IGC’s late June forecast does not see the grain trade providing any relief to the dry bulk market in the coming year. Indeed, they see global trade edging down by a further and totaling just 571 million tonnes in the 2023/24 crop year. More specifically, the IGC sees the soybean trade continuing to increase modestly, driven by increasing Brazilian exports and increasing Chinese imports. But trade in wheat and coarse grains is expected to decline over the coming year, mainly due to lower shipments from Ukraine. A drawdown in stocks helped keep exports high over the past year, but with grain production expected to be down 40% compared to the pre-War level, Ukrainian exports are likely to suffer this year, falling back to 33 million tonnes, as shown in the chart below.

As a result, we expect Panamax and Supramax rates to remain relatively sluggish over the coming year, as the grain trade is an important source of demand for these sectors.

But the outlook for the grain trade has been dealt a further blow this week by Russia’s announcement that it is not willing to renew the agreement allowing Ukraine to export grain from its ports; at least not until new terms are reached regarding Russia’s own grain and fertilizer exports.

While it is too soon to say with any degree of certainty what the outcome will be, the risk of lower Ukrainian grain exports is worth considering. In the extreme case, where Ukrainian grain exports fall to zero over the next 12 months, and where no additional supplies from other exporters make up for this loss, we would expect Panamax earnings to average $2,000 per day below where they would be if Ukrainian exports totaled 30 million tonnes over the coming year.

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