The grain market was in the doldrums in the first half of 2023 with the suspension of the Black Sea grain corridor and plunging Argentinian exports. However, the market has been resilient thereafter, backed by the massive expansion in exports from Russia and Brazil which filled the vacuum in the grain market created by lower exports from Ukraine, Argentina, the EU and US.
The resilient grain trade in 2023
Drewry expects the demand for dry bulk commodities to increase by 1.1% q/q in the fourth quarter of 2023, supported by the resilient grain trade, which is forecast to expand by 0.4% in 2023 due to increased grain exports from Russia, Canada, Brazil and Australia. While in the second quarter of 2023, Drewry expected a contraction in grain exports in the full year, the company has revised its forecast upwards.
With the suspension of the Black Sea grain deal and persistent damage to ports due to the war, exports from Ukraine have fallen to historically low levels in the third quarter of 2023, taking the volume of seaborne exports below the levels from the second quarter of 2022, when the war began. Less than 5% of Ukraine’s exports are currently shipped on dry bulk vessels, with more than 60% being transported via the smaller Danube ports to Romania and East Europe and the remaining over land. The humanitarian corridor, which was started by Ukraine in September to evacuate ships stuck at its ports after the war, is increasingly being used to ship grains to nearby countries like Egypt and Turkey. However, seaborne exports through the Black Sea will continue to dwindle as Ukraine’s harvest area will suffer damage, adversely affecting exportable surplus, particularly wheat.
Meanwhile, exports of Russian grain, mainly wheat, have soared in the third quarter of 2023, recording the highest quarterly exports from the country after 2018. As Drewry had forecast, the reduction in the export tax on wheat bolstered its exports. The country’s record wheat harvest for the second consecutive year will make it the top wheat exporter in the world, with a leading market share of more than 22%. Russia’s exports from the ports in the Black Sea surged to Turkey, Egypt and Saudi Arabia in January Ð October, surpassing the volume traded in 2022 by a huge margin, supporting the tonne-mile demand.
We project a rise in grain exports from Australia, Brazil and France to China, leading to a multi-fold increase in China’s grain imports this year amid a decline in domestic production. China’s grain imports surged by 14% in January Ð October, with imports from Brazil rising from 2 million t in 2022 to 11 million t in January Ð October 2023. While panamax vessels have been catering to the phenomenal rise in Brazil’s exports to China, the employability of supramax vessels has also risen on this trade route. Similarly, the share of France’s exports shipped on panamax vessels has expanded, benefitting the most from the rise in total exports. On the other hand, Australia’s grain exports on supramax and handysize vessels have appreciated in 2023, resulting in a rise in their share of the country’s total exports and aiding the vessel demand.
