BayWa underlined the importance to grain prices of the renewal of the Black Sea grain deal, as it reported an 88% surge in grain trading profits fuelled by knock-on effects of the Ukraine war, which has also sent energy earnings soaring.
The German-based group said that the future “price trend” in “standard” commodities, such as rapeseed and wheat, “will depend heavily on developments in Ukraine”, following its invasion by Russian in February.
“Russia is already stoking fears of a new blockade in the Black Sea,” BayWay said, noting that the outlook for the UN-brokered deal guaranteeing the safety of grain shipments from Ukraine ports “could once again lead to distortions on commodity markets”.
The comments come ahead of the expiry on November 19 of the export agreement, under which 10.2m tonnes has so far been shipped, of which corn and wheat combined account for 60% of volumes, with sunflower oil and rapeseed on 7% shares apiece.
Talks over renewing the deal have seen Ukraine seek a one-year extension, and the inclusion of ports in southern Mykolaiv which accounted for more than one-third of the country’s shipments before the invasion.
Russia – which last week reversed course on a short-lived suspension of its participation in the pact – has demanded support for its own exports of grains, and fertilizers, and is believed to be seeking an easing on Western constraints on Rosselkhozbank, the state agriculture lender.
Amis, the G20-backed food market monitoring service, has termed the extension of the agreement “critical” for world food markets, both short-term and in the longer run, with a suspension seen cutting Ukrainian farmers’ willingness to invest in future crops.
Indeed, a failure to renew the deal would mean that “market disruptions will continue to have global impacts into 2023 and possibly beyond”, besides bringing upward “pressure on world food prices, especially for wheat”, Amis said.
‘High price volatility’
BayWa said that its Cefetra grain trading business was able to “use to its advantage” the “high price volatility and above-average prices overall in agricultural commodities markets” seen in the January-to-September period, and reflecting in part the knock-on effects of the Ukraine war.
Cefetra’s 88% surge to E52.8m in operating profits for the nine-month period, on revenues up 28% at E4.64bn, also reflected “brisk trade” at the Dutch-based Royal Ingredients unit, which supplies sweeteners and starches to the food and paper industries.
BayWa’s overall agricultural operations reported a 143% jump to E270.9m in operating profits, driven too by the German-based agricultural trade business, which benefited from enhanced margins in grain trading and rises in fertilizer and agrichemical prices.
The group also noted strong growth in energy profits, up by 158% at R206.5m on revenues up 89% at R6.95bn, as sales of solar energy parts and heat energy carriers rose, against a backdrop of the spike in European power costs prompted by the Ukraine war.
BayWa – which reported group earnings for the nine months of E244.3m, near triple the E83.5m reported a year before – restated its upgraded guidance for the full year.
The group expects 2022 operating profits to reach E475m-525m, above a previous forecast of E400m-450m.
Operating profits in the January-to-September period reached E413.2m, up from E197.3m a year before.
BayWay shares rose by 2.6% to E47.30 in early deals, taking them E1 from their record-high close set in June.