Ukrainian Strikes Threaten Up to One-Third of Russia's Wheat Exports

Ukrainian strikes on Russian logistics are putting pressure on grain prices within Russia and could reduce wheat exports by sea by up to a third, according to ratings data from analytics firm Kpler and Russian firm Sovekon.

The route through the Kerch Strait and Sea of Azov, which accounts for about one-third of Russia's wheat exports, is now at risk due to restrictions. This is having the greatest impact when Russia is traditionally 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. As a result, the export surplus of Russian wheat may face a logistical 'bottleneck'.

The Russian domestic market is already feeling the effects, with grain purchase prices beginning to decline. Third-grade wheat fell by 1.3% over the week, fourth-grade wheat by 2.3%, and fifth-grade wheat by 2%. The price of barley fell by 6.5%, and that of sunflower seeds by 2.1%. On a year-over-year basis, the price of wheat in Russia has already fallen by 9%, while the export price at the port of Novorossiysk dropped by nearly 10% during the last week of July.

Kpler believes that a temporary decline in Russian exports could create additional opportunities for other suppliers, primarily EU countries, in the markets of the Middle East, North Africa, and sub-Saharan Africa.