What would the end of the Russia / Ukraine war mean for Australian grain prices. It’s a complex question, the complexity of the answer is also being further exacerbated by the current US craving for import tariffs, who and how will exporters / importers retaliate to these tariffs.
At first look the world has basically discounted any premium the war is having, or had, on export capacity of grain. During the 2014 Crimean conflict Black Sea exports saw little disruption. This wasn’t the case initially in the recent conflict. Without warning Ukraine grain exports were halted, without provocation. This created chaos in the world wheat market. At one stage India suggested it could export the wheat volume that Ukraine normally did. Only later that year did we realise India were just talking their book and they actually became a net importer of wheat.
The one cost that has taken the brunt of increases has been freight rates. Yes grain flow has been reduced from both countries due to a combination of the conflict, weather, cash flow and production capability, i.e. ground usually sown is now in a war zone, but the flow of grain has not been reduced by the volume that initially caused a rally in wheat to over 1000c/bu at Chicago back in March 2022.
What may happen, weather permitting, is a slow building in export capacity back to pre war volume, more so for Ukraine than Russia. In 2019-20 Ukraine wheat exports were 21.02mt, in 2020-21 they were 16.85mt, 2021-22 = 20mt, 2022-23 = 17.12mt, 2023-24 = 18.58mt, 2024-25 = 15.5mt. Nett Black Sea exports are unlikely to change a heap, ownership of the land producing that wheat may swing from Ukraine to Russia, but the volume is unlikely to change if you combine the output of both Russia and Ukraine. Changes more likely from weather, yes, war not so much. What may be impacted is the volume of ships happy to take Black Sea grain to the world and what the cost of those ships are. Insurance rates may fall considerably (unlike my car and home rates here) and execution times should be reduced. The impact this will have on the price of wheat is likely to be bearish, but at the end of the day the key will continue to be the global stocks to use ratio. Are we heading back into a more predictable phase of wheat pricing……….maybe, but not if Trump has a say.