Earlier this week, Reuters said traders are concerned that any military action in Ukraine could disrupt crop movement and force importers to seek alternative sources of key food and feed ingredients like wheat and corn.
A trader based in Singapore told the news agency that ships were cautious about entering the Black Sea already before Russian President Vladimir Putin's decision today to launch a full-scale military operation in Ukraine.
Russia and Ukraine hold a combined share of roughly 29% of global exports of wheat and 19% of corn. The way the situation has unfolded, buyers would have to look for supplies from somewhere else.
Refinitiv shipping data cited by Reuters shows the Middle East and Africa region was the destination for some 70% of the wheat exports from Russia in 2021.
As regards to Essentica’s business, the company can confirm that production would not be directly impacted by the crisis in Ukraine due to the fact that it is sourcing all the raw materials it needs from Bulgarian producers and it has never resorted to imports.
Of course, the events of the week could lead to a further increase of grain prices (which are already significantly above prices in the previous year) on both the domestic and international markets. Such an increase would inevitably lead to higher production costs and selling prices.
The disruption of Ukrainian supply of ethanol and its derivatives to the country's traditional trading partners inside and outside of the EU would be another consequence. This would put many industries in a situation where they will have to find alternative sources of supply over a short period of time so as to avoid disruptions in their own production.