Grain and oilseed prices “may rise further” thanks to the Ukraine conflict, ag trader-to-renewables group BayWa said, as it unveiled a more than doubling in earnings, which helped its shares to a 13-year high.
The German-based group, which owns grain trader Cefetra, said that the world grain and oilseed supply balance, which has been affected by factors such as South American dryness, “should remain limited” in calendar 2022.
This squeeze means “there is an expectation that it will be possible” to sell supplies left over from the latest harvest “at higher prices” in the first half of this year, noting “better trading margins” achieved so far this year.
The conflict between Russia, the top wheat exporter, and Ukraine, the biggest sunflower oil shipper and a major origin for corn, rapeseed and wheat too, “may also lead to supply bottlenecks”, BayWa added.
This means that prices “will at least remain stable at a high level, and may rise further”, the group said.
The comments come amid disruptions to exports from both Russia and Ukraine, thanks to impacts of the conflict such as port closures, and Western sanctions which have complicated payments to Russia.
Russia last week warned that storms had cut 420 Ukrainian naval mines in Odesa and Nikolaev adrift of their mountings, leaving them drifting in the western Black Sea.
The setback to crop availability has helped send prices of many agricultural commodities soaring to multi-year highs.
BayWa said that the “very high” price volatility instilled by the conflict would create “marketing opportunities” for its Cefetra unit, which operates in many European countries, besides Dubai.
“However, the risk of default by counterparties will also increase, leading to higher hedging costs.”
BayWa also noted that in its home market high fertilizer prices, which have also been enhanced by the war, have seen farmers “exercise restraint” in planning 2022 nutrient applications.
Earlier this week, UK-based Wynnstay also said it expected higher prices “to curtail some demand” of inputs such as fertilizers.
BayWa reported earnings of E128.8m for 2021, more than double the E59.5m reported a year before, on revenues up 21% at E19.84bn.
Group operating profit rose by 26% to E266.6m, helped by a 38% jump to E142.3m in the result from agricultural operations, on revenues up 13.8% at E12.04bn.
Shares in the group, which termed 2021 the “most successful year in the company’s history”, closed up 6.9% at E46.00 in Frankfurt, having earlier touched E46.50, their highest since October 2007.