Ukraine grain supply faces stiff challenges despite Russia deal: Bunge

Global commodities trader Bunge, in its quarterly earnings call, has hinted it is cautious about optimism over the Kyiv-Moscow trade deal, which allows agricultural trade to resume through key Ukrainian ports.

If Bunge's concerns hold any weight, then grain supply from major Black Sea ports remains in doubt in the coming days, likely stoking supply fears for, among others, corn, wheat, and sunflower oil.

"I think under any scenario, we need those [Ukrainian grains] in the global market, but I think it will be slow," Bunge CEO Greg Heckman said in the company's second-quarter earnings call July 27.

Since Moscow's invasion of Ukraine Feb. 24, major Ukrainian ports have been virtually shut amid intense missile attacks from the Russian army. Kyiv has been alleging that the invading army planted numerous marine mines to block the Ukrainian ships from carrying grains to the rest of the world.

Heckman had expressed a similar concern in Bunge's Q1 call in April.

"Even after a resolution [to the war in Ukraine], there will be a long tail on this [post-war restoration] because there is infrastructure that has been damaged," Heckman said on the April 27 call. "There are seaborne logistics that have to be untangled. There are waters that need to be de-mined."

Russia's invasion has put a lot of strain on the global food supply chain as Ukraine is one of the leading shippers of wheat, corn, and sunflower oil, among others.

"Ukraine is one of the areas that we had targeted for growing our origination," Heckman said. "And of course, that's not happening now [because of the war]. But in the long term, we expect to be a part of rebuilding that [Ukraine's infrastructure] as it is an important origin [for Bunge]."

Deal with Russia

With mediation from the United Nations and Turkey, Moscow and Kyiv signed a deal July 22 to allow agricultural exports through Ukrainian ports in the Black Sea to resume. The agreement is valid until November and may be automatically renewed without further talks.

According to the market analysts, the deal allows Ukraine to export nearly 20 million mt of grains and oilseeds, which have been stuck at different ports since the war began.

Not surprisingly, prices have agricultural commodities have slipped since the agreement. Platts FOB Black Sea wheat (Ukraine, 11.5%) was assessed at $363.50/mt July 27, down $17 from the month prior, while FOB Black Sea corn (Ukraine) was estimated at $305.25/mt, down $34.25 on the month, according to the S&P Global data.

Analysts believe that the resumption of Ukrainian shipping routes is likely to ease commodities supplies in the coming days, but Bunge is very cautious about the deal.

"We hope it [Ukrainian ports] can get opened up, but there's damage to the origination, there's damage in the ports. There's complexity in insuring those vessels. So that's a big unknown hanging out there," Heckman said.