World Grain - November 2014 - 110

FEATURE

Black Sea
T

roundtable

he Black Sea region has made its mark in recent years
as a major player in the wheat export market and it's
starting to gain some traction as a corn exporter as well.
A panel of experts on the region's agricultural sector participated in a roundtable discussion at the 9th Annual Oilseed &
Grain Trade Summit Oct. 9 at the New Orleans Hyatt in New
Orleans, Louisiana, U.S. Most of the discussion focused on
the two major exporters in the region - Russia and Ukraine
- which in recent months have been engaged in a conflict
taking place primarily in the Crimean Peninsula.
Despite the conflict, the speakers noted that grain has been
moving freely out of ports in the region on the heels of bumper crops in both nations.
"For June through August exports out of Russia and
Ukraine, both countries recorded records, in part just because
of the sheer size of the crop," said Levin Flake of the U.S.
Department of Agriculture's Foreign Agricultural Service,
who has served as an agricultural attaché in Moscow, Russia.
"You also had traders who forward-sold the crop. Traders
went short, which is another reason why agricultural exports
in that region were so big right away upon the new harvest."
The Black Sea region, which panelists noted has the largest
area of top-quality soil in the world, is no stranger to bumper
harvests, but its role as a major grain exporter is a relatively
recent phenomenon.
Flake said that in 2000 the region was exporting just 5 million tonnes of wheat but that number has reached nearly 35
million tonnes annually today, which has taken a big share of
the market away from traditional exporters such as the U.S.
and Canada.
"We see the Black Sea region rising from about 22% of
world wheat trade to 32% in the next two years while we see
the U.S. falling from 20% to about 17% as U.S. wheat exports
are expected to be largely flat," Flake said.
Still, the region is not without its disadvantages in terms of
wheat exports. The climate is unpredictable and the government trade policy, particularly in Russia, is highly volatile,
110

by Arvin Donley

Experts at Oilseed & Grain
Trade Summit discuss region's
growing impact on the
international grain market
while the U.S. and Canada are known as reliable suppliers of
wheat on an annual basis. Wheat quality in the Black Sea region, as a general rule, also compares unfavorably to the U.S.
and Canada, but it also is a less expensive option which has
made it attractive, particularly to markets in the Middle East.
"The wheat yields in the Black Sea region this year have
been incredible," Flake said. "The quality has been a little bit
of an issue but the crop overall has been amazing. The Black
Sea has been driving price action at least for the first quarter
of this year's wheat trade. They have a lot of supply to move
and the price is very competitive on the global market. It's
definitely a trend we need to be watching."
Black Sea region countries, particularly Ukraine, are also
emerging as bigger players in the corn export market, the
panelists noted. Ukrainian corn exports having quadrupled in
recent years, rising from a little over 5 million tonnes in 200910 to nearly 20 million in 2013-14, according to the USDA.
Production in that same time period has tripled from 10 million to 30 million tonnes.
"Ukraine has been a strong seller of corn to Egypt going
back about eight years," Flake said. "Egypt typically buys
from the U.S. and South America on a premium through
(the Chicago Board of Trade), so they told Ukraine they
would buy corn but it would have to be a price on premium
to Chicago. Because of that they have very correlated markets to Chicago in the Black Sea at the moment."
November 2014 / World Grain / www.World-Grain.com

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World Grain - November 2014

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