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by Dennis Voznesenski, RaboResearch, Analyst - Agriculture

The purpose of this paper is to highlight an analogous period when access to Black Sea wheat exports was lost, and to assess the potential impact on markets and prices of the current Russia-Ukraine conflict. This paper does not compare the geopolitical landscape.

Report summary

Finding 1: Chicago wholesale prices rose by 77% between June 1914 and February 1915, when prices peaked. Of that 77% rise, 22% occurred prior to the closing of the Dardanelles Strait in October 1914. The remaining 45% increase occurred once the Dardanelles Strait was closed.

Finding 2: Russia and Ukraine account for ~30% of global wheat exports at present. Between 1905/6 and 1909/10 Russia accounted for only 22% of wheat exports. It can be argued that due to an increased global reliance on Black Sea wheat, a price rise could now be larger. Further, wheat stocks excluding Russia are currently lower compared to the average versus 1914/15.

Finding 3: Certain importing countries - including Russian-aligned countries and those where food security concerns are prominent and civil unrest possible - might not adhere to western sanctions, and continue buying even during a conflict. This will depend on the length of a potential conflict and the tightness of the world wheat market.

Finding 4: Australian exporters will face increased demand, and while farmgate prices will benefit, they will likely not see the full upward impact of a global price rise due to Australia's large recent harvest, limits on export capacity, and positive outlook for the 2022 season.

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