Russia’s annexation of the Crimean region of Ukraine earlier this month is good news and bad news for agriculture investors and asset managers in neighbouring countries such as Poland and Romania, according to farmland asset managers and consultants.
While it could spell good news for wheat-supplying countries nearby, the crisis tarnishes the region overall, argued Tom Athey, director at Mintridge International, the farmland asset manager.
“Turmoil in Ukraine does not help the reputation of the Eastern European region as a whole because some people tend to wrongly lump it as one, as if it was still the Eastern bloc,” he said. “Investors that might be considering investing in Romania or Poland for the first time could now be a bit more cautious.”
“On the flipside Ukrainian exports might now come with a risk premium to the pricing of their wheat due to uncertainty over policy and control,” he added. “Wheat and corn prices have already gone up this week due to the ongoing turmoil and possible sanctions on Russia, and the big grain importing countries in North Africa and the Middle East could turn to countries like Poland and Romania to secure supplies from the Black Sea area.”
Ukraine is one of the world’s largest producers of wheat and since the Ukraine crisis Strategie Grains, the European agro-economic research firm, has revised its forecast for European Union soft wheat shipments by an extra 700,000 tonnes.
The research group revised its forecasts on Wednesday on the expectation that Middle East and North African buyers will turn to European Union countries for supplies instead of an uncertain Ukraine.
“Romania will pick up the demand of countries that import soft wheat such as Egypt, Morocco, Tunisia, Libya,” Véronique Fradin, wheat market analyst at Strategie Grains told Agri Investor in an email. “Poland, Germany and other Baltic countries will capture some demand from the Gulf and Middle East countries that import hard wheat, although they will have a smaller harvest because of winterkills.”
Bernd Meissner, managing director of Kronstein Alternative Investment Advisors, the München-based placement agent said some investors he was talking to were taking “a very opportunistic view” that the compression on prices could be helpful for their investments in Romania and other countries in the region. But market signals that surrounding country risk premiums could increase concerned other investors who were more hesitant about the region, he added.
Mintridge International is a farmland property firm and asset manager assisting investors in the acquisition and management of farmland investments in Poland, Romani and Slovakia in conjunction with Velcourt, the UK-based farm manager.