Wheat supply shock - DCX has the alternative

Mariana Gizun

Russia’s invasion of Ukraine has created a global wheat supply shock. Commodity markets, already struggling with COVID-related supply chain issues, high freight rates and adverse weather, now face further shocks as grain shipments from Ukraine and Russia close, raising the prospect of global food shortages.

Ukraine and Russia rank among the world’s most important producers and net exporters of agricultural commodities and fertilisers. Together they account for 29% of global exports. The situation is critical for the Middle East and North Africa which depend on imported wheat. The world's largest wheat importers - Egypt, Turkey, Bangladesh, Indonesia and Iran - import around 60% of their requirements from Ukraine and Russia. Lebanon, Tunisia, Yemen, Libya and Pakistan source half their wheat from the Black Sea Region. 

When supply chains collapse, agility is crucial. Digital Commodity Exchange (DCX) marketplaces for fertilizer, grains, pulses and rice enable users to find new reliable suppliers quickly whilst mitigating risk. DCX marketplaces are carefully managed with all users vetted prior to onboarding. This curation creates secure marketplaces where users can establish new connections with trustworthy counterparties. While sanctions are closing markets, DCX is opening markets.  

Róbert Jakab, MD at Emirates Food, comments “since we joined DCX platforms our company has benefited from improved efficiency and faster processes. Uploading a trade request and agreeing terms with the sellers is very easy. We can quickly and easily agree all contract terms. The biggest benefit is the establishment of long-term business partnerships based on trusted data.” 

Buyers of wheat need to find new suppliers. Canada and the US have low stocks due to poor wheat harvests in 2021/22. Argentina has an export ban in place and Australia has reached its maximum shipping capacity. Europe and India are looking to fill the wheat supply gap.

India, which is the second-largest wheat producer in the world after China, increased exports to a record 8.5 million tons in the season ending March 2022. It is looking to open markets in Egypt, Turkey, China, Bosnia, Nigeria and Iran. 

Brazil, a net wheat importer, is increasing exports. Turkey, South Africa and Sudan are now buying Brazilian wheat - none of whom had bought from the South American nation in the last four years. 

In today’s turbulent commodity markets, the ability to switch to reliable alternative supply chains quickly is vital for producers, distributors and consumers. Supply chain actors need to have confidence that the deal is reliable with vetted counterparts, that legal documents are stored on a consensual audit log and that the history of the transaction immutably preserved on the blockchain. The DCX mission is to improve market access and boost efficiency, security and transparency in the form of price discovery. We work with some of the world’s top players in commodity finance, insurance, freight, inspection and logistics. Register at: https://www.dcx.group/