Reduced Forecasts For Ukrainian Coarse Grain, Ukrainian Wheat, and Russian Wheat Exports

By Jeffrey Landsberg

As we have been discussing in recent work, Russian officials have four demands to end their military operations: Ukraine to cease its own military action, change its constitution to enshrine neutrality, acknowledge Crimea as a Russian territory, and recognize the separatist republics of Donetsk and Lugansk as independent states. Yesterday we published statements from Ukraine's President Zelensky regarding how the NATO demand is likely to be agreeable. Today, Ihor Zhovkva, Zelensky’s deputy chief of staff, reiterated Ukraine will not trade a "single inch" of territories -- and therefore at this point in the fourteen-day war, the demands that are being pushed back against are acknowledging Crimea as a Russian territory and recognizing the separatist republics of Donetsk and Lugansk as independent states.

The Ukrainian government's position on Crimea, Donetsk, Lugansk mirrors some insightful conversations we have had with some of Commodore’s Ukrainian clients. Zelensky has become very popular in Ukraine, and we have been told many times that his popularity would vanish if he agrees to giving up Crimea, Donetsk, Lugansk. That has long been unacceptable to many Ukrainian citizens and is still unacceptable to the government. Overall, we do not anticipate that Russia will give back what they have taken... and Ukraine is also continuing to publicly tell the world that they will not concede one inch of territory. How this war ends is anyone's guess.

Going forward, we remain of our view that in the near-term dry bulk ton miles will increase as nations try to source from other exporters -- but over time, an absolute loss of cargoes would become a net negative for the dry bulk shipping market if the war stretches on, as a large amount of Ukrainian and Russian cargoes would simply not be able to be replaced. Regarding the grain market, of note today is the United States Department of Agriculture released their first forecasts since the war began. They have lowered their forecast for this year's Ukrainian coarse grain exports by 6.2 million tons, lowered the forecast for Ukrainian wheat exports by 4 million tons, and lowered the forecast for Russian wheat exports by 3 million tons.

These export forecasts are still very preliminary, but we continue to stress that a prolonged conflict will continue to increase the likelihood of the dry bulk market being unable to fully offset a loss of Russian/Ukrainian cargoes from other nations. We will have more coverage on the global grain market in our next Weekly Dry Bulk Report.