Delay of ice in Black Sea could see more grain exports from the region

An unseasonal lack of ice at ports across the Black Sea and Azov Sea could see a flurry of grain trade in the region, sources said this week, with exports of corn and wheat expected to rise at a time when trade is normally thin.

Milder weather in the region has meant ports normally affected by ice are able to export for a few weeks longer, raising the potential for more grain exports out of the region at a time of a record crop.

“It’s super mild, so far there are no ice issues… So I think we will export at a solid pace,” one trader said, with freight sources seeing no significant ice issues for a few weeks yet.

“In terms of ice, it’s much easier than the previous year. The forecasts that I have heard tells of ice coming no earlier than mid-January, with a good chance that it could even be late-January,” one Black Sea freight source told Agricensus.

Temperatures in the port of Odesa are plus 2 Celsius (36 Fahrenheit), according to forecasts from weather.com, versus a seasonal average of -1 C (30 F).

Both Russia and Ukraine have sizeable volumes of wheat and corn to move this harvest, as the former tries to shift its massive crop and the latter has struggled with internal logistics that have delayed getting grains to ports.

Russian wheat exports through to December 27 have surged to 20.7 million mt – up 34% on the same period of 2016 – a dynamic that has made Russian wheat the most competitive globally, often shipping as far abroad as Latin America.

That means any delay in ice may spell bad news for EU exporters, who typically compete with Russian exports, but have exported 20% less volume this year than last as a result of cheaper Russian wheat.

And the lack of ice could also allow Ukraine to catch up on exports of corn, which have been disappointing at 5.8 million mt up to January 1 2018, according to government data – 20% below the previous year.

That's handy

While the delay in ice may increase exports from the region at this time of year, the differentials between smaller and larger vessels may get wider as a result too as ice can limit the availability of suitable vessels and cause a spike in freight costs.

For example, last week reports emerged that the price of handy-sized vessels and panamax vessels were trading at parity, although that situation has started to unwind.

“Prices for corn in handy ports is usually discounted more versus bigger ports, because of the potential ice. Normally it is a $2/mt spread, but now people are trying to discount it by $3-4/mt,” a second corn trading source said.

Prices for FOB Ukraine corn have held around the $165/mt level for much of the final quarter of 2017, with FOB 12.5% Russian wheat even more firmly locked at around $190/mt over the same period.