Port Blockade: Wheat Market Expected to Face the Most Severe Impact
The suspension of seaborne exports is expected to have the greatest impact on Ukraine’s wheat market.
This view was expressed by Taras Kovatsenko, Commercial Director at Viliia, who outlined several reasons for the assessment.
«First, Ukraine processes only a small share of the wheat it produces, while domestic consumption has declined in recent years due to the shrinking population. Second, unlike rapeseed, Europe is not a traditional market for Ukrainian wheat. In addition, the EU reinstated import quotas for Ukrainian wheat last year. Ukraine has already exhausted its current quota, while exports above the quota are economically unviable,» he explained.
According to the expert, under these conditions wheat can only be exported in transit through longer logistics routes, including via ports in Poland or Romania.
«However, the capacity of these logistics corridors is significantly lower than the volumes that need to be exported. We therefore expect a substantial decline in market liquidity and the sharpest fall in prices among the major crops,» the expert said.
He added that, under the current circumstances, the most appropriate strategy would be to maintain a long position in wheat, as it is currently the least liquid crop. However, only farms with sufficient financial capacity to avoid selling their entire harvest immediately will be able to pursue this approach.
