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London - The Black Sea, a burgeoning source of grain exports, has probably overtaken the US for the first time to become the largest shipper on the global market.
Exports from Russia, Ukraine and Kazakhstan probably rose to 80 million tonnes in the 12 months through June as crops expanded while local currencies weakened, making overseas sales priced in US dollars more attractive, according to UkrAgroConsult.
Shipments rose 14% from a year earlier and were about 10% higher than those from the US, data from the Kiev-based researcher and the International Grains Council showed.
Countries in the Black Sea have become a powerhouse in grains in recent years. Russian exports of wheat more than doubled in the past decade while Ukrainian corn shipments surged 17-fold, according to the US Department of Agriculture.
The biggest traders, such as Cargill and Louis Dreyfus, have offices in the region, and international commodity exchanges are considering how to introduce Black Sea futures that attract trading.
"It’s a milestone for the Black Sea," Matt Ammermann, a commodity risk manager at futures and options broker INTL FCStone, said by e-mail, referring to the latest estimated exports.
The region "has always been susceptible to weather risk, a bit more than Western Europe and the US due to farming practices. As these practices become more efficient, yields should become more stable."
Russian Exports
Ukraine accounted for most of last season’s shipments, probably increasing exports by 13% to 37.85 million tons, UkrAgroConsult said in a report. Russian overseas sales are forecast to have risen 9% to 33.5 million tonnes while exports from Kazakhstan are estimated at 7.4 million tonnes, a 22% increase from a year earlier.
Russia boosted sales to Arab countries; Ukraine did likewise to Thailand, Indonesia, China and the European Union; and Kazakhstan to Iran, Turkey and China, said UkrAgroConsult analyst Marina Sych.
While the gains have been driven by bumper crops and weaker currencies, traders have also sought to boost exports to compensate for a drop in prices, UkrAgroConsult said. The researcher expects shipments to remain high in the 2016 to 2017 season.
Wheat futures
The Black Sea’s ascendancy over the US may not last into the current season, as dry weather cuts the size of the crop in Ukraine. Exports from the three Black Sea countries, which were 4.8 million tonnes bigger than the US in 2015-16, will probably be 2.2 million tonnes smaller in 2016 to 2017, the London-based IGC predicted.
As the Black Sea becomes more important for global grains trading, commodity exchanges are paying close attention.
CME Group started Black Sea wheat futures in 2012, but they didn’t manage to attract enough trading. Euronext is planning grain contracts for the region, Olivier Raevel, head of commodities at the bourse, said earlier this year.
"One would think there should be a need for Black Sea futures," said Michael McDougall, a director at Societe Generale SA in New York. "But so far it’s been hard to make contracts work partly as farmers don’t hedge out forward. They sell more on a spot basis. There’s also political risk."
