Economy
Buyers expect costlier wheat as Russia-Ukraine war drags on
Global wheat buyers who have delayed restocking their inventories are bracing for higher costs when they return to the market in the coming weeks, with world prices soaring as the Russia-Ukraine war shows no signs of abating.
Top wheat importers in Asia, the Middle East and Africa that were counting on the Black Sea region for wheat have been finding it hard to secure supplies, as attacks on vessels and port infrastructure have brought cargo movements to a near standstill since July.
The constraints have triggered a rally in prices, with benchmark Chicago futures climbing 40% from June lows to a three-and-a-half-year high and physical prices from alternative exporters surging, threatening a fresh bout of food inflation for some of the world’s most vulnerable consumers.
Most global importers have held off making alternative purchases for the past few months, hoping for an agreement between Russia and Ukraine to allow grain shipments, but local supplies are running thin, especially in import-dependent Asia, traders and millers said.
Competition for cargoes is poised to intensify until the end of the year, when the Southern Hemisphere harvest kicks in, with prices set to rise further in the meantime.
“The Black Sea is an important region for shipping grains, and if buyers are not able to get grain out of this region, they have to look elsewhere for supplies, which is going to drive prices up further,” said Ole Hansen, head of commodity strategy at Saxo Bank.
While some Middle Eastern and African buyers are already seeking alternatives, some importers say they have supplies that could last until November or year-end, before they need to seek larger volumes.
Ships stuck
Russian wheat exports are on track to decline to around 1 million tons in September from 5 million tons last year, while Ukraine will ship about 1 million tons this month, half of last September’s levels, according to Kpler estimates.
The crunch will hurt Asia the most in the near term.
“There are very few ships going in to load, and whatever little is being exported out of Russia and Ukraine is going to some buyers in the Middle East and Africa. Nothing is heading to Asia,” said Ishan Bhanu, an agricultural analyst at commodities data firm Kpler.
No. 2 global importer Indonesia has received only about 60,000 tons from the Black Sea this month, down from half a million tons last September, he said.
Indonesian millers are turning to other suppliers, including Argentina, and are paying around 20% to 25% more for Australian wheat than the prices at which they previously booked Black Sea cargoes, traders said.
While some millers have started booking bulk wheat cargoes from Australia and Argentina, others have turned to smaller shipments to ride out immediate tightness, traders said.
A senior executive at a Southeast Asian milling company said it has booked some containers from Australia to replace Russian and Ukrainian wheat, but was not buying bulk quantities because of the high cost.
“Prices have risen quite a bit, and we are not in a position to pass on the entire cost to our flour buyers,” the executive said, declining to be named as they were not authorized to speak with the media.
Black Sea wheat from Romania is quoted at around $340 per ton C&F to Southeast Asia and Australian Premium White wheat at around $345 per ton for October shipment, some 25% higher than Black Sea wheat was trading before the shipping crisis.
Dwindling supplies
Top global buyer Egypt is scheduled to receive less than a tenth of the volume it received from Russia and Ukraine in the September-to-October period last year. But it has some leeway.
“Importers cannot wait forever but can wait for quite a long time as the harvests in the Middle East and North Africa have just arrived, giving breathing space but of course not for the full season,” said one European trader.
In the first half of September, Egypt’s wheat imports dropped to 143,870 tons, from 876,139 tons a year ago, when Russia and Ukraine accounted for a bulk of the shipments, according to official data.
Egypt is turning to France and other European suppliers, diversifying away from Ukraine and Russia, Minister of Supply Sherif Farouk said on Sunday.
However, some Egyptian buyers are still shying away from alternatives, as millers prefer wheat varieties they are accustomed to processing and have domestic supplies to draw on, Cairo-based traders said.
Many mills in Egypt are operating at 30% of capacity, said Hesham Soliman, an Alexandria-based trader, as they hold out for prices that could drop as much as one-fifth if Black Sea shipping is restored.
“They are all waiting to see Russia and Ukraine sit down. The market is paranoid that if this happens, then the market will suddenly go down $50 or $60 per ton.”
Almost half a million investors hold stakes in more than 100 Turkish investment funds worth around $18 billion, which authorities last week ordered to be liquidated during a market selloff, the capital markets regulator said Wednesday.
Turkish authorities also took steps last week to support financial stability, including measures to boost Turkish lira liquidity and ease some capital and margin requirements after some funds struggled to meet withdrawals during a stock market sell-off.
The Capital Markets Board, or SPK, said in a statement that the number of individual investors in the funds affected was 455,758, citing central securities depository records.
SPK mandated Işbank and Ziraat Bank to oversee the liquidation of 131 investment funds managed by seven portfolio management companies, including Tera Portföy, Pusula Portföy and Hedef Portföy, on the TEFAS electronic fund platform.
Meanwhile, authorities have widened an investigation launched by prosecutors last week after the SPK filed criminal complaints over transactions in shares of companies Katılımevim, Gündoğdu Gıda and Destek Finans.
Turkish media reported that five people who were detained in recent days, including Pusula Holding Chair Serdar Turhan, Tera Yatırım Holding Chair Emre Tezmen and three fund administrators, had appeared in court Wednesday and had been jailed pending trial.
Justice Ministry said in a statement Tuesday that individuals faced charges including violating Türkiye’s capital markets law, membership of a criminal organization, and aggravated fraud committed by company executives or others acting on behalf of a company during commercial activities.
Treasury and Finance Minister Mehmet Şimşek said Friday that the liquidation of funds would not put pressure on the Borsa Istanbul Stock Exchange because regulatory changes should prevent any contagion risk.
Economic growth has remained “resilient” in many countries despite the war in the Middle East and energy pressures, the Organisation for Economic Co-operation and Development (OECD) said in its interim report on Wednesday, as it slightly raised forecasts for the year.
Global economic growth is now seen at 2.9%, a 0.1-point increase from earlier estimates in June, the Paris-based group of 38 industrialized countries said.
Even though energy prices have soared since the U.S. and Israel launched strikes against Iran last February, the OECD noted that “broader financial conditions remain supportive,” as seen in rising equity markets and continued access to credit.
“Sizeable oil inventories, additional supply from outside the Gulf economies and discretionary government support measures all helped to cushion the impact on the global economy,” the group said in its quarterly update.
It also cited the massive investments in artificial intelligence and the resulting boost to production and trade, which could result in “stronger growth than projected”.
But global growth has slowed sharply from the 3.4% last year, and the group trimmed its 2027 growth forecast by 0.1 percentage point to 3%.
Governments have started raising interest rates to contain inflation pressures stemming from high oil and gas prices, which have sent diesel and other fuel costs to highs not seen in years.
That has sent government bond yields to levels not seen since the global financial crisis of 2007-2008, pushing up borrowing costs even as countries worldwide grapple with high debt and deficits.
“Rising bond yields underline more than ever the need for enhanced efforts to contain and reallocate government spending, improve public-sector efficiency and strengthen revenues to ensure longer-term debt sustainability and maintain the ability of governments to react to significant shocks,” the OECD said.
It also warned of prolonged inflation if the Mideast war continues, with price increases in the G-20 group of developing and emerging economies seen at 4.1% overall this year.
“Other significant downside risks include potential weather-related supply shocks, including a very strong El Nino, that adversely impact agricultural production and add to rising food price pressures,” it said.
For the United States, it expects gross domestic product (GDP) to expand 2.2% this year, up 0.2 points from its June forecast, while the eurozone could see growth of 1%, also up 0.2 points.
Japan’s growth is now seen at 0.8%, up 0.2 points, while the forecast for the Chinese economy, the world’s second-largest, was held steady at 4.5%.
Saudi Arabia has restarted operations at its vital East-West pipeline and could resume exports from the Red Sea port of Yanbu later Tuesday, a report said, as signs mount of an increase in Middle Eastern oil flows.
The resumption of supplies Tuesday helped to drive selling on global oil markets. Global oil benchmark Brent crude fell by more than $2 a barrel towards $97, its lowest since Sept. 8.
Drone attacks Saudi Arabia said were launched from Iraq forced the kingdom to shut the pipeline on Sept. 11, halting crude loadings at the key Yanbu port.
Since the U.S.-Israeli war on Iran disrupted oil flows from Saudi Arabia and its Gulf neighbors through the Strait of Hormuz, Riyadh has been using the pipeline to reroute around 4 million barrels per day, around 4% of global supply, to Yanbu.
Full resumption could take weeks
The pipeline was pumping at a low rate after its restart, Reuters reported, citing sources briefed on the matter.
Aramco was seeking to get the pumping rate back to 4 million bpd, one of the sources said. The pipeline has a capacity of 7 million bpd.
Reaching a rate of 40% of capacity will take a couple of days and a full restart will take 6 to 8 weeks, a security source said. A separate oil industry source said a return to full pumping rates would take up to six weeks.
Three pumping stations serving the pipeline were damaged in the drone attack, according to satellite imagery and industry sources. The line is serviced by 11 pumping stations and two separate pressure relief stations, according to industry assessments.
The pipeline will resume crude supply to Aramco refineries located on the Red Sea coast, one of the sources said, adding that one cargo was scheduled to load at Yanbu later Tuesday. The person said it would be bound for China.
Traders were getting ready for Saudi oil loadings by moving tankers to Egypt’s Mediterranean Port Said for ship-to-ship transfers and also to Sidi Kerir, another two trading sources said.
Oil prices have also dropped this week after Iran said it could reopen the Strait of Hormuz within seven days and because Saudi Arabia has loaded more ships at its Ras Tanura port, raising expectations of increased exports through the Strait.
Türkiye’s stock exchange will replace more than a quarter of the constituents of its benchmark BIST 100 index, it said Tuesday, a move announced as regulators seek to ensure market stability following a liquidity crunch caused by a sell-off in investment funds.
The Borsa Istanbul did not provide a reason for removing index constituents, which will be effective from next month in the biggest reshuffle since the stock exchange announced new market structure rules six years ago.
Authorities intervened last week to shore up market stability after the liquidity crunch at investment funds triggered a sharp sell-off in the benchmark stock index, including demanding the liquidation of some investment funds.
They have also detained people as part of an investigation launched after some funds defaulted on redemption requests.
The benchmark index was down 0.23% at 10:11 a.m. GMT Tuesday, stabilizing so far this week after dropping about 8% last week.
Regulators also this month updated how they calculate free-float rates, which left out some fund holdings.
Financial services company Destek Finans Faktoring and savings financing firm Katılımevim, which have been among the companies at the center of suspicious share dealings, will leave the BIST 100, the statement from the exchange said.
Conglomerate Anadolu Grubu Holding and fast-food retailer TAB Gıda will return after being removed in the previous period, it added.
Esenboğa Elektrik, Işıklar Enerji Yapı Holding and Odine Teknoloji, which joined the BIST 100 in the previous quarterly reshuffle, will also be removed.
Destek Finans will also exit from the BIST 30, while TR Anadolu Metal will join.
BIST 30 companies are exempt from the new concentration limits, and a stock’s removal will require funds to reduce their holdings.
Healthier pricing
Onurcan Bal, an investment adviser at brokerage Gedik Yatırım, said the latest changes announced by Borsa Istanbul also include adjustments to shares of companies being removed, such as Işıklar Energy, Izdemir Energy, Kiler Holding and Odine Teknoloji, which had recently come under pressure and recorded floor-price trading.
“For the period ahead, when investors look at the indices and the market, they will be able to see healthier pricing, with the indices serving more clearly as the main benchmarks,” Bal told Reuters.
Cemal Demirtaş, deputy general manager responsible for research at Ata Yatırım, said the index changes would help lead to healthy functioning of the market and restoring investor confidence.
He said he expected further steps soon to support the healthy functioning of the fund market and Borsa Istanbul.
Fund investigation
The Capital Markets Board (SPK) last week mandated Işbank and Ziraat Bank to oversee the liquidation of 131 investment funds managed by seven portfolio management companies, including Tera Portföy, Pusula Portföy and Hedef Portföy, on the TEFAS electronic fund trading platform.
These funds hold large positions in stocks such as Destek Finans that are being removed from the indexes.
Market segment criteria changed
Borsa Istanbul has also added new criteria for companies seeking inclusion in the BIST 30 and BIST 100 indices.
Shares included in the BIST 30 and BIST 100 must be traded on the Star Market. Under a directive amended Monday, companies traded on the Star Market will now also be assessed based on the volatility of their share prices and the size of their equity.
Companies seeking to be listed on the Star Market will be assessed on whether they fall within the highest volatility bracket, with the threshold set at a maximum of 10%.
In addition, companies listed on the Star Market will be required to have equity above the median equity value of all companies subject to the assessment.
Bal at Gedik Yatırım said the changes mean that stocks characterized by excessive volatility and sharp price movements may fail to meet the Star Market criteria, while also limiting their ability to be included in major benchmark indices.
“From this perspective, we believe the regulation is not merely a change to the market-segment classification. It could also indirectly contribute to the structure of key benchmark indices such as the BIST 30, BIST 50 and BIST 100, which are important in terms of representing the broader market,” Bal said.
Bal said the Star Market was the most important segment of Borsa Istanbul’s equity market in terms of trading volume and the market size of listed companies.
“Therefore, taking excessive volatility in price movements into account when determining which companies qualify for the segment can be viewed as a positive development, as it could support more balanced price formation and make the Star Market a healthier benchmark for investors,” he said.
Europe needs to reconsider its trade relations with China as the imbalance between the two sides continues to grow, the European Union Chamber of Commerce in China warned on Tuesday, marking the latest in a series of statements highlighting the gap.
“I think what concerns us (is) that if you see these movements here it gives rise to some fundamental questions about trade,” the organization’s president Jens Eskelund said in Beijing.
Trade, when done right, creates value and efficiency, he said. “But if you are in a situation suddenly where trade is only creating value for one party and not the other, then of course the question becomes: why trade?”
Eskelund pointed to China’s trade surplus with Europe, estimated at around 1 billion euros ($1.15 billion) a day. The chamber has also long criticized competitive conditions in China.
According to Eskelund, the issue is not only whether European companies can succeed in China, but also whether the broader trade relationship remains stable.
“There needs to be a win also for Europe, and that’s what we need to get to,” he said.
Eskelund said there was growing agreement in Europe over the challenge China poses to European industry.
He also warned that China may not yet fully understand that attitudes are changing in Europe in a way that could ultimately allow it to take action.
Brussels and Beijing are currently negotiating over trade disputes, with possible solutions expected in October. New EU tariffs have also been discussed.
In a new position paper containing 1,096 policy recommendations, the chamber, which represents more than 1,600 EU companies operating in China, said some of the security concerns harboured in Beijing and Brussels were similar.
The EU is also developing a policy framework aimed at safeguarding its autonomy, industrial resilience and competitiveness, the report said.
A “healthy balance” between areas where economic security is a priority and those where greater openness for businesses is possible could benefit both economies, it added.
Türkiye expects to see its total trade with the U.S. surging by more than 10% this year to the level of around $42 billion to $43 billion, a top official said on Monday, reiterating the long-term goal of $100 billion.
“Our bilateral trade volume exceeded $38 billion last year. This year, we expect our total bilateral trade to increase by more than 10% and reach approximately $42 billion-$43 billion,” Trade Minister Ömer Bolat said during an address in New York.
“This means that annual trade between the two countries will reach $50 billion within two years,” he added.
Bolat was speaking during a reception hosted by the Türkiye-U.S. Business Council (TAIK) of the Foreign Economic Relations Board (DEIK) as part of the 19th Türkiye Investment Conference.
The reception, held at the New York Public Library, was attended by Bolat, Industry and Technology Minister Mehmet Fatih Kacır, Governor of the Central Bank of the Republic of Türkiye (CBRT) Fatih Karahan, DEIK head Nail Olpak, and TAIK chair Murat Özyeğin, as well as representatives of the business communities from Türkiye and the U.S.
Speaking at the event, Bolat said that the U.S. is Türkiye’s third-largest trading partner in terms of exports and fourth-largest in terms of imports.
Recalling that President Recep Tayyip Erdoğan and U.S. President Donald Trump have set a target of increasing bilateral trade to $100 billion, Bolat said that the two countries are on the right path to achieving this goal in the medium to long term.
Bolat said that the trade performance between the two countries demonstrates the depth and resilience of their economic relationship, adding that cooperation is not limited to trade.
He noted that the two countries are continuing to deepen cooperation in the fields of energy, defense, and technology, and said that “promising” figures have also been achieved in terms of mutual investments.
Bolat said that investments do not merely bring capital to countries in both directions, but also create significant added value through technology transfer, innovation, employment, and production.
He said these investments create jobs both in Türkiye and the U.S., adding that investments between the two countries strengthen supply chains on both sides of the Atlantic.
Emphasizing that Türkiye-U.S. economic relations are built on mutual trust rooted in decades of alliance, Bolat said they are determined to further strengthen this foundation and are exploring new areas of partnership.
Özyeğin, who noted that next year will mark the 100th anniversary of diplomatic relations between Türkiye and the U.S., said that as with all longstanding partnerships, “the foundation of this strength lies in dialogue, trust, and the determination to continue building together.”
“Throughout this conference, our goal is precisely to do that: deepen our dialogue, establish new connections, and identify new opportunities for the two business communities to work together,” he said.
On the first day of the conference, a meeting titled “Türkiye’s Economic Outlook and Investment Opportunities” was held with the participation of Treasury and Finance Minister Mehmet Şimşek and CBRT Governor Karahan.
In addition, the Turkish industry minister met with American business leaders at a roundtable discussion on “Industry and High Technology.”
The events, organized to increase trade and investment between Türkiye and the U.S., are set to run over three days, from Sept. 21 to Sept. 23.
-
Politics3 days agoTürkiye launches raids on Israel-linked international fraud network
-
Economy2 days agoAMD joins $1 trillion club as last chipmaker to cash in on AI rally
-
Economy2 days agoTürkiye extends funds liquidation process, freezes execs’ assets
-
Politics2 days agoErdoğan leaves for UN General Assembly with Gaza in mind
-
Sports3 days agoTrabzonspor euphoric after Salah hat trick tames Galatasaray
-
Economy2 days agoUS says all Iranian airlines to be ‘shut down’ Wednesday
-
Politics2 days agoSea Wolf maritime drill begins amid tensions between Greece, Türkiye
-
Politics2 days agoTürkiye rejects disinformation targeting child protection operations