Wheat Buyers Face Higher Costs as Black Sea Supply Disruptions Tighten Markets

Atlanta — Global wheat buyers are facing increasingly tight supplies as disruptions to Black Sea shipments push importers toward alternative sources at substantially higher prices.

Countries throughout Asia, the Middle East and Africa that depend heavily on wheat from the Black Sea region have struggled to secure cargoes after attacks on vessels and port infrastructure significantly reduced shipments. The disruptions have continued since July.

Chicago wheat futures have gained about 40% from their June lows, reaching a three-and-a-half-year high. Wheat from alternative exporting countries has also become more expensive, raising concerns about additional food-price pressures in some importing markets.

Many global buyers postponed purchases in recent months in hopes that an agreement would allow grain shipments from Russia and Ukraine to return to normal levels. With inventories falling, however, that approach is becoming increasingly difficult to sustain.

The supply shortage is especially important for Asian countries that depend on imports. Indonesia, the world’s second-largest wheat importer, received only about 60,000 tons of Black Sea wheat this month, down from roughly half a million tons in September last year, according to agricultural analyst Ishan Bhanu of Kpler.

Indonesian millers have responded by seeking supplies from alternative exporters, including Argentina. Australian wheat is also being purchased, although traders said buyers are paying roughly 20% to 25% more than the prices previously paid for Black Sea cargoes.

Some Southeast Asian millers are opting for smaller shipments to address near-term shortages instead of locking in large quantities at current prices. A senior executive at a regional milling company said the business had bought wheat containers from Australia to replace Russian and Ukrainian supplies, while avoiding bulk purchases because of the higher cost.

The supply constraints are also being felt across the Middle East and Africa. Russia’s wheat exports are expected to decline to around 1 million tons in September, compared with 5 million tons a year earlier. Ukraine is projected to ship about 1 million tons this month, roughly half the amount recorded in September last year.

Competition for available wheat cargoes could remain strong through the end of the year, when harvests in the Southern Hemisphere are expected to add more supplies.

The tighter market is creating difficult decisions for millers. Rising wheat costs can eventually feed through into flour and other food products, but companies may be unable to pass on the full increase to consumers without risking weaker demand.

Egypt, one of the world’s largest wheat importers, is also under pressure, with many mills reportedly operating at only 30% capacity.

Buyers that have enough supplies to last until November or the end of the year may face less immediate pressure. Companies that need to rebuild inventories sooner, however, are increasingly being pushed toward more expensive alternative sources.