Is Russia-Ukraine grain exports deal a Trojan Horse for global agriculture?

The deal between Russia and Ukraine to create a grain export corridor, and the subsequent bombing of Ukraine’s main Odessa port less than 24-hours later, is the kind of drama surrounding global agriculture that can sometimes feel like an abstraction, even for observers with a direct interest in the sector.

Like markets everywhere, physical trade in agricultural goods relies on a network of people for whom international markets are more concrete; specific ports, specific buildings, specific people. It is for these people – such as Copenhagen Merchants’ Gert Bosscher – that the full impact of the Ukraine war’s effect on ag markets since late February has been more tangible.

Bosscher – a Geneva-based grain trader with more than 30 years’ experience in Central European and Asian markets including Bulgaria, Poland and Kazakhstan with companies including Bunge, Glencore and the Australian Wheat Board, according to his LinkedIn profile – told Agri Investor that while he spent the 1990s bringing grain from West to East and much of the time since bringing grain from East to West, the trade has largely gone through the same companies, terminals and people.

The period since Russia’s invasion has been a surreal one, Bosscher said, beginning with an initial rush to help friends and clients cross the border from Ukraine. More recently, he has found himself invited to join the dialogue at the very highest levels of diplomacy as Ukraine and Russia negotiated the grain export deal.

Looking ahead, Bosscher highlighted the example of Yugoslavia in suggesting the war in Ukraine will likely last between three and five years and could pave the way for the type of development now seen in countries like Serbia – where Oaktree-Capital Management-backed Trans-Oil has acquired a portfolio of 31 grain storage sites and two port terminals late last year.  In the meantime, he said, trade flows remain fragmented between alternative routes through Romania and Poland that can’t match what Ukraine traditionally supplies to global markets.

The outlines of potentially more permanent changes, he said, are starting to come into focus.

“The minute the [Ukrainian] ports go open, the Romanian flow will disappear. That’s a temporary flow that has a different impact. The Polish flow is a bit of a different story,” he said. “It did not go massively in the past because of all the red tape, complications on different rail tracks, etc. Now, it needs to be done by force and, after the war, I do see those flows continuing.”

It will be Russia’s role in global ag markets that poses the more difficult set of questions for the long term, Bosscher said, highlighting how trade in food, feed and medicine has continued with Iran for years despite far-reaching sanctions. He described a May conference in Geneva that included Ukrainians but no Russians, and another in Turkey the same week with no Ukrainians that included Russians interested to discuss future business.

Bosscher said it is in part in deference to his Russian and Ukrainian colleagues that he is avoiding, for now, talk of future business with Russia.

“I by no means approve of what Russia is doing. On the other hand, we have to realize they are sitting on 40 million tons of wheat, and they are today’s world’s biggest producer. Thank God we had a good crop in Australia and a reasonable one in Argentina,” he said. “Imagine if we would have had crops in Australia like we had two years ago. Then we would have a big problem. So, in a way, you need to keep it [Russia] flowing as well.”