By Suleiman al-Khalidi/Amman/Reuters

The Black Sea region, mostly Ukraine and Russia, has become the major source of wheat and barley for Middle East importers from Libya, Egypt and Syria to Saudi Arabia and Yemen, dislodging US, Canadian and European suppliers who once dominated the market.

Middle Eastern commodities traders and officials said fears that tensions between Russia and Ukraine could come to a head, however, are discouraging most buyers from striking deals with Ukraine suppliers for the new season, which starts in July.

“At this time of the year, end of March, people are selling forward contracts for the new crop. Traders and trade houses start selling July shipments. This is not happening now. People are very reluctant; they don’t know what to expect,” said Tony Mudallal, a senior commodities trader in an international house.

Ukraine, the world’s third-biggest maize exporter, also has come to dominate in corn exports, taking market share from traditional suppliers such as Argentina and Brazil.

“Ukraine proved to be a powerhouse in the trade of grains in the last 10 years. It affected the region positively in terms of supply, mainly in wheat, corn and barley,” Mudallal said.

On the supply side in Ukraine, foreign trading houses are avoiding fixing new grain export contracts as well. Russian corn export prices also have been rising for two weeks.

Ukraine’s main ports continue to operate, but Middle Eastern traders were concerned that shipping could be affected.

“The situation could change if fighting breaks out,” said Malak Jehad al-Akiely, a dealer in International Grain Suppliers-Jordan operation.

“If Ukraine enters into more turmoil, this could mean declaring force majeure, and that would definitely cause tension around other Black Sea origins and raise insurance premiums,” an Egyptian government source said.

Conflict-torn Syria, which has relied mainly on Ukrainian wheat in the last two years to cover a shortfall in local production, is likely to be the hardest hit by the Black Sea conflict, traders say.

Any delays in grain shipments could exacerbate Syria’s food shortages as Western financial sanctions make it more difficult to switch to alternative markets, according to two Damascus-based Syrian traders.

The quality of Ukraine’s grain and its proximity to Mediterranean ports have helped it win lucrative business from Middle East state importers with lavish budgets to subsidise bread and basic foodstuffs at low prices.

Middle Eastern countries have already sealed deals for around 80% of the grain they need for the current season to end-June, traders said.

A switch to other sources is likely to push up Middle Eastern import bills substantially in the coming season, however, with prices rising by $120-$150 per metric tonne from levels in existing contracts of around $280 per tonne FOB for Russian and Ukrainian wheat, according to regional experts.

“Ukrainian grains are very competitive price-wise, and they are as good or even better quality than say western European or other sources,” another commodities trader based in Jordan said.

“If the situation escalates, it means the Middle East consumers will pay a higher bill by up to $150 per tonne,” he added.