Global Grain Markets: Recent Disruptions and Protectionist Measures

Black Sea grain disruptions & Indian food protectionism

It has now been more than a month since Russia decided to pull out of the Black Sea Grain Initiative, which allowed the safe passage of grains from three Ukrainian Black Sea ports. Unsurprisingly, grain markets reacted strongly to the initial news. However, they have since given back all the gains made following the deal's collapse despite Russia attacking grain terminals along the Danube.

Ukrainian grain exports under the Black Sea deal were significant and helped both Ukrainian and global markets. However, in addition to exporting from Black Sea ports, Ukraine also increased export volumes from the Danube by rail and road. Therefore, even if we aren't seeing exports under the deal, Ukraine can still export to the world market, although admittedly with smaller volumes.

However, what has really provided comfort to grain markets, particularly corn, is that supply growth elsewhere should ensure that global markets are comfortable. Both the US and the EU are expected to see strong growth in corn supply over the 2023/24 season. This means that 2023/24 global ending corn stocks will still increase if we are to lose similar volumes of Ukrainian corn as exported under the grain deal last season. The global wheat market is more vulnerable to supply disruptions, but assuming no significant supply disruptions elsewhere, the market should be able to absorb potential Ukrainian losses.

While the reaction of grain markets to the end of the grain deal was short-lived, we are still seeing another round of food protectionist measures taken by some governments. This is most evident in India. Last year, the government banned wheat exports and more recently, it's also restricted some rice exports. There are also suggestions that the government could ban sugar exports over the 2023/24 season, whilst there are reports that the government could also scrap an import duty on wheat. Part of these domestic food security concerns are due to the impact that El Nino is having on the Indian monsoon this season. And the government may also feel it has to take action to ease food prices with an election next year. However, for global markets, these measures risk pushing some agricultural prices higher.