London | Reuters — South American grain exports are set to overshadow Black Sea shipments this year as doubts grow over a U.N.-backed Ukraine deal and international traders cut commercial activities in Russia, a top executive with major commodities group Cargill said.
The Black Sea grain deal, which allows the safe passage of grains through three Ukrainian ports, was extended on May 17 for two months — a shorter time than expected.
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“The corridor is definitely not performing as it was at the beginning,” Jan Dieleman, president of Cargill’s ocean transportation business, told Reuters.
“It’s more focused on the smaller (ship) sizes now… I do think that with some quite big crops in Brazil, you might also see some of the demand being switched out of the Black Sea into Brazil at some point, on corn, for instance.”
Record production of both corn and soybeans in Brazil in the current 2022-23 season has led to strong demand for vessels in South America.
Dieleman said if the Black Sea grain corridor deal ended, the price impact would be less “simply because it is a smaller (export) program already.”
“The grain market is not the same as it was a year ago.”
Dieleman added that the Black Sea area was “still a war zone and ships are being attacked and it’s not business as usual.”
This week, President Vladimir Putin said Russia was considering withdrawing from the deal, which was also brokered by Turkey. He alleged the West had cheated Moscow by not delivering on promises to get Russian farm goods to world markets.
The appetite of western companies to ship Russian grains out of the Black Sea was expected to weaken going forward.
In March Cargill said it would no longer handle Russian grain exports from July, although the shipping unit has said it will continue to carry grain from the country’s ports.
Other leading traders, including Louis Dreyfus and Viterra, have also joined the Russian grain export exodus in recent months.
“It has become more complicated for us,” Dieleman said. “Our activity is clearly less.”
Cargill is one of the world’s biggest charterers of dry bulk ships.
Dieleman said shipping activity from Russia was being replaced by a shadow fleet of ships that were not chartered in the same way as in international markets.
“We see more of the grey/black fleet moving more stuff as well. That is taking a bigger share of the exports at the moment,” he said.
“There is still a bit of self-sanctioning going on in this market, and people don’t want to get involved unless they have to.”
— Jonathan Saul is a Reuters correspondent in London, England.
