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Stuffed Russian Grain Ports Show Risk of Black Sea Escalation

FILE PHOTO: Wheat grain is pictured in a warehouse in Bashtanka, Mykolaiv region, as Russia's attacks on Ukraine continue, Ukraine June 9, 2022. REUTERS/Edgar Su/File Photo

Stuffed Russian Grain Ports Show Risk of Black Sea Escalation

Reuters
Total Views: 9472
August 9, 2023

(Bloomberg) —

Russian grain ports are overflowing after two big harvests. That means any military escalation in the crucial Black Sea risks depriving the world of huge amounts of crops it’s counting on.

Port capacity is being stretched as the wheat giant struggles to clear the volumes despite massive exports. Russia shipped 4.4 million tons of wheat in July, a record for the month and almost 60% above average, according to consultant SovEcon.

Some terminals on the Azov Sea stopped accepting grain due to lack of storage capacity, SovEcon said. That’s a problem for farmers if the situation in the Black Sea between Ukraine and Moscow worsens and slows Russian flows, because they’ll have nowhere to send their harvest that’s critical to global food supplies.

Top wheat shipper Russia, which last month exited a deal allowing Ukraine to export from Black Sea ports, moves most of its grain through the waterway. The country started the export season with the largest wheat stockpile in three decades, according to the US government. The big supplies have helped make Russian wheat among the world’s cheapest.

Russian sales slowed in recent weeks because of bottlenecks caused by handling so much grain, according to SovEcon.

“You have rail traffic jams and delays around seaports and it snowballs,” SovEcon Managing Director Andrey Sizov said. “Everything is used almost.”

For now, Russia’s smaller ports on the Azov Sea are more overloaded than the main Black Sea grain port of Novorossiysk, SovEcon said. Vessels sailing from Azov Sea ports usually unload onto bigger ships at the Kerch Strait which sail onward through the Black Sea, but navigation through the strait has been restricted for safety reasons after an attack on the Kerch bridge earlier this month.

Black Sea

Any escalation in the Black Sea could have big knock-on effects for global grain trade. Kyiv hit a Russian oil tanker over the weekend and warned that more attacks could follow, as it seeks to retaliate for the Kremlin’s efforts to cripple Ukrainian grain exports. That may make some shipowners more cautious about calling at Russian Black Sea ports.

If the backup persists or worsens, that could create storage headaches for the country’s grain growers and force them to pile more up at farms. For example, they may not have space to store different kinds or classes of wheat separately, according to Dmitry Rylko, director of Moscow-based consultant IKAR. 

“The storage situation is quite tense,” he said. “Despite the high exports there’s still a lot of grain, and the south is expecting the second wave of the harvest.”

© 2023 Bloomberg L.P.

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