Welcome to the Corona Correction series in association with Refinitiv.
I'm your host, Roger Hirst.
Food supply chains have been one of the main talking points during the Coronavirus crisis,
with the initial scramble to hoard essentials eventually giving way to concerns about the
ongoing supply from regions which are in lockdown.
Svetlana Malysh is Refinitiv's analyst for Black Sea Agricultural Markets.
I wanted to find out if supply chain issues would also become issues about production.
Black Sea Region is the biggest wheat and sunflower oil supplier and agriculture industry
has been really heavily impacted by the Coronavirus.
Initially, the region has faced fading demand and falling prices.
Then panic buying of food by consumers made importing countries step up grain purchases,
mostly wheat, to secure sufficient food supply.
So we are currently watching Black Sea prices climbing up.
For a second a week in a row we are reaching the two month high.
That's a really impressive move for the prices.
The major exporting countries of Russia and the Ukraine are really worried about their
own food supply, especially in the second half of the season, and there are four months
till their next crop.
Thus, prices have also been strongly supported by Russia through it's recent intention to
limit grain exports, and increase concerns about possible disruptions in world supply
chain.
Russia has been a leading wheat exporter for the last several years, and actually this
is a very serious concern.
A slowing economy and Coronavirus lockdown made local currency falling.
But this is actually rather favorable for the Black Sea trading companies and are really
promoting exports.
The rebound in the Black Sea prices can be considered a positive move for exporters.
I think logistics will determine the prices for commodities, along with their availability
of supply is a short end prospects.
If we compare grain prices development, including for Black Sea with the other commodities,
they haven't suffered much, being the staple food and have always been in demand.
Yes, the market is rather turbulent and hardly predictable, but the price is the real point.
But getting closer to the new crop, the prices tend to ease.
Moreover there new crop prospects have been rather favorable so far.
And that's interesting, one Black Sea trader said to me, 'what goes up must come down'
and sectors should be monitoring by all market participants in these uncertain times.
Small movements of changes in demand, possible export restrictions, various economic indicators
like currency rates, supportive measures for end consumers and so on.
And logistics, also really matter.
Svetlana outlined just how turbulent the outlook has already been.
After initial declines in demand and falling prices, panic buying has squeezed food prices
higher.
These inflationary bottlenecks during this deflationary bust have also been highlighted
by previous Refinitiv analysts.
And as the demand squeeze has kicked in, exporters such as Ukraine and Russia have started to
limit exports to ensure their own domestic demand is fulfilled.
Harvests are not for another four months, and concerns about the ability of the workforce
to harvest the summer crop are making countries relatively defensive.
Logistics remains key, and prices for staples are likely to remain buoyed by protectionism
and the uncertainty about future harvests.
So this is one area in which inflation may also impact consumers who are already under
considerable duress.
We'll see you later with another update.