General market situation

General market situation: global impact of Russia-Ukraine conflict

We are currently living in very uncertain and difficult times. The war in Ukraine affects everyone, and energy prices are skyrocketing. No one ever expected it; these are unprecedented circumstances.

Reliability and quality have been high priorities at Dossche Mills for many years, which is why it is important for us to be there for you in this difficult time. Our aim is to provide you with accurate information about the situation and its impact on our sector.

Dossche Mills currently sources little or no wheat from the Ukraine and Russia region. Our company has sufficient stocks or agreements with Western European suppliers to honour ongoing agreements with our customers for this harvest. Nevertheless, the situation has a global impact on wheat availability and prices in Europe. Scarcity is driving up prices, including of other commodities.

Many countries are currently blocking their cereal exports (including Bulgaria, Moldova and Hungary) to avoid a situation in which their own population can no longer afford food prices and out of the concern that all their stocks would be exported. Russia also announced yesterday that it would curb grain exports until at least 30 June.

The current harvest of winter wheat has already been under pressure, causing prices to rise sharply. Apart from this, the war also affects the sowing of spring wheat, as well as the infrastructure for storage and agricultural machinery. This can reduce the yield in the short to medium term. The fact of the war, which creates even more upward pressure, is now added to this.

Due to the war situation, sowing in Ukraine (the granary of Europe) is difficult, as is the treatment of winter cereals. Wheat suppliers are currently very cautious, charging extremely high prices or offering nothing at all, waiting for the situation to normalise.

Logistics are also faltering:

• Few if any bulk grain shipments from the Black Sea can get through, shipments from Romania and certainly from Russia are also difficult.

• A lot of drivers from Eastern Bloc countries have returned to their families, resulting in a shortage of drivers.

We see overall disruption in the use of different crops for the different sectors, with other sectors starting to use wheat as an alternative to other raw materials that are also more difficult to obtain from Ukraine (e.g. the animal feed industry). In addition, demand for local wheat from bioethanol producers is rising due to subsidies and more expensive diesel prices.

In other words, the entire global economy is under pressure, because even if the war were to end soon, it has already had a significant impact on sowing various crops for the next harvest season. In addition, oil and energy prices continue to soar and more countries are expected to impose quotas and/or export duties (mainly South America).

If the situation escalates further, it could structurally disrupt the flow of wheat exports from that region. Both Ukraine and Russia export a lot from Black Sea ports.

The impact of all this on wheat prices on the international futures markets is having a significant impact on the quotations of the current harvest today, and is also pushing up prices for the new harvest. Since the beginning of this year, the price of wheat has risen by more than 50%, to its highest level since the food crisis of 2008.

Unfortunately, all these elements mean that we are once again forced to adjust the prices of our products. Dossche Mills considers constant quality to be of paramount importance and so we do everything possible to guarantee the quality and delivery reliability of your ingredients thanks to close cooperation between our purchasing, production, logistics, quality and development departments. Let us hope that the situation will soon de-escalate somewhat and that calm will return to the market.