Asia's appetite for Australian wheat to rise as Russia-Ukraine war disrupts shipments

Regional buyers in Asia may shift demand to Australian wheat after strikes on energy and port infrastructure in Russia and Ukraine disrupted grain harvests and shipping, traders and producers in Australia and Asia said July 13-14.

Recent attacks have mounted diesel supply concerns in Russia just as winter crop harvest is ramping up, as drone strikes have targeted multiple oil refineries across Russia, and some refineries have yet to resume operations as of July 13, showed media reports.

Both Russia and Ukraine also saw significant damage near critical grain shipment routes and port infrastructure, with Russia temporarily suspending vessel traffic through the Don-Azov Channel and the Kerch Strait late July 10. Some shipowners have also pulled back from the Black Sea market amid recent missile attacks and crew deaths, while several exporters have suspended dry bulk cargo loadings across ports in both Russia and Ukraine, including the Port of Kavkaz and Chornomorsk, according to multiple Asian and European trade sources and media reports.

The disruptions have offset any anticipated bearishness from new-crop harvest pressure in the Black Sea, with CFR offers of Black Sea milling wheat to Southeast Asia about $10/mt higher week over week for August-to-September shipments, according to two European traders and two Southeast Asian flour millers.

Platts, part of S&P Global Energy, assessed the Milling Wheat Marker up $4.50/mt at $233/mt FOB on July 13, the highest level since June 24.

Heightened tensions in the Black Sea could divert some regional demand from Southeast Asian to Australian wheat instead, said four Australian wheat traders. Multiple Asian market participants said Australian wheat saw little regional interest in recent weeks due to fewer offers for September shipment, with growers absent from the market awaiting higher wheat prices, while shipping capacity was also tighter due to annual port maintenance.

"I think it will push some demand our way," said a Victoria-based wheat trader.

"Haven't seen any demand yet, but the day is early," said another trader based in Perth.

While demand diversion could be bullish for Australian wheat prices, traders said they had yet to see an immediate impact on FOB pricing.

Platts assessed Australian Premium White up $1/mt from a day ago at $271/mt on July 13, while Australian Standard White with no protein guarantee was unchanged at $266/mt.