Ukrainian Traders Worry Grain Corridor May End

The grain corridor, which was extended on 18^th November 2022, is set to run for 120 days. Since the new corridor has been in effect, large amounts of goods including 1.28 million metric tonnes of sunflower oil and 878,00 metric tonnes of sunflower seed have been exported, according to the Agricultural Ministry of Ukraine. Large amounts of the seeds have been sold to crushers in the EU and significant amounts of sunflower oil have been shipped to India, Turkey and China in recent months. The grain corridor has allowed Ukrainian farmers and traders to keep cash flowing despite the prices offered often being lower than the international market.

Yet, market players have told Mintec that some sellers are now looking to offload as much stock of oils and oilseeds as possible, because many Ukrainian market players think it is inevitable that the grain corridor will close before the allotted 120 days. Due to sellers looking to offload supplies, prices have started to move sharply down, with trades of sunflower oil of Ukrainian origin CIF Izmir being reported to Mintec at $1,125/mt, down over $100/mt from trades heard earlier in February.

A trader commented to Mintec, “the sowing campaign is coming up [between April and May for sunflower seeds] and selling needs to take place to have money for the supplies needed. The problem is that many traders think these new attacks Russia are planning will doom the grain corridor deal and, if that happens, export is not impossible but very difficult. So, what we are seeing is a lot of sellers all coming to the market at once which is very bearish for prices.”

Despite extensive crushing of rape and sunflower seeds having taken place, which has led to a supply glut of rapeseed and sunflower oil in the EU due to the grain corridor deal, if the deal were to end then supplies of both seed and oil may draw down. This potential supply shortage could lead to a tight balance sheet and may provide some bullish momentum to a stagnant EU market.

A trader told Mintec, “buying of oils from an EU perspective is more or less zero at this stage. Without international players such as India, China and Turkey coming into the market, I am not sure what some players would have done. Having said that, any change to the Black Sea situation could ignite demand again, particularly when some of these long and expensive sunflower oil contracts some players are on start to run out.”