Markets reacted violently to the Russian attack during the night. Oil, grain, metals and energy prices skyrocketed. The West announced further sanctions. Especially wheat futures prices rallied sharply today. Main driving force is the fear of a decline in supply from the Black Sea region.
Ukraine is central to the supply of grain to Europe and around the world. Rich, fertile soils have made Ukraine a leading grain exporter. The Black Sea region is considered the granary of the world. The ports are located along the Sea of Azov - connected to the Black Sea by a strait between Russia and Crimea, annexed by Russia in 2014 - and on the Black Sea coast further west. The southwestern ports of Odessa, Pivdennyi, Mykolayiv and Chornomorsk handle nearly 80 percent of Ukraine's grain exports, according to research firm UkrAgroConsult.
Concerns about the security of these supply streams are growing after Russia ordered military operations in Ukraine.
Russia and Ukraine's combined wheat exports for the 2021-22 marketing year (June-July) are estimated to account for 23% of the global total of 206.9 million metric tons, according to the US Department of Agriculture. Ukraine is also the world's third-largest producer of barley which is the second most important crop after wheat.Most of the barley is used as feed for farm animals. However, two-rowed barley is also used for the production of malt.
Therefore, the tensions in the Black Sea region are having a direct impact on grain and thus malt prices. It is still too early to foresee the full consequences of today's events, but the easing of the tense malt supply situation for breweries (inside.beer, 2.2.2022) that was expected over the course of the year is becoming increasingly unlikely from today's perspective.