Russia's Wheat Exports at Risk Amid Ukrainian Strikes

Ukrainian strikes on Russian logistics are causing pressure on grain prices within Russia and may reduce wheat exports by sea by up to a third. According to ratings data from analytics firm Kpler and Russian firm Sovekon, cited by Kommersant, the route through the Kerch Strait and Sea of Azov is at risk. This is because about one-third of Russia's wheat exports are shipped via this route.

The restrictions are having a significant impact now, when Russia is typically ramping up shipments of the new harvest. Analysts note that redirecting these volumes to Black Sea ports will be difficult due to limited capacity in railways, road transport, and port infrastructure. This may lead to a logistical 'bottleneck' in Russian wheat exports.

The Russian domestic market is already feeling the effects, with grain purchase prices declining at the end of July. Third-grade wheat fell by 1.3%, fourth-grade wheat by 2.3%, and fifth-grade wheat by 2%. Barley prices dropped by 6.5%, while sunflower seeds decreased by 2.1%.

On a year-over-year basis, the price of wheat in Russia has already fallen by 9%, with an export price drop of nearly 10% at the port of Novorossiysk during the last week of July. Sovecon attributes logistical disruptions at Azov Sea ports to the arrival of the new harvest.