CAIRO, EGYPT — “It would be better if we could keep politics out of the grain market,” said a representative of Russian wheat exporters during the opening session of the 33rd annual IAOM Mideast & Africa Conference and Expo, Nov. 12-15, in Cairo, Egypt.

But the twin shadows of war in Gaza and the Black Sea, and the many coups in Africa plus civil war in Sudan, made that impossible at a conference focused on milling demand from — and grain supply to — the Middle East and Africa. That Egypt borders Gaza added immediacy to the sense of geopolitical peril that characterized the conference proceedings.

Politics was everywhere. Delegates expressed their sympathies to Ukrainians serving dinner under the watchful gaze of the Giza sphinx, but a one-minute silence for Palestinian innocents made no mention of Israeli victims of Hamas’ Oct. 7 surprise attack on Israel. 

Many Americans, including IAOM stalwart and AgResource Company founder Dan Basse, were conspicuous by their absence after US government warnings “to reconsider travel to Egypt due to terrorism.” Despite this threat, 752 attendees, 146 millers from 62 mills, 144 grain traders from 52 companies, and 95 exhibitors were present at the cavernous Egypt International Exhibitions Center.

Summing up the current grain market, Oga Venkat, regional manager, Middle East & Africa, Cargill International, said from a buyer’s perspective it had become a “very difficult environment.”

He added: “If you look at the people present in the room and the countries involved in IAOM, 80% of the countries represented in this room are today facing serious domestic issues. We’re talking food inflation, we’re talking high interest rates, we’re talking Forex issues and cash issues.

“We are in an environment today that, between the geopolitical issues, but also all the issues the countries are facing from a financial perspective, I think things are just going to be difficult.

“A few years back, (millers) took positions two to three months in advance. Now most are extremely cautious. They’re looking at the domestic situation first. They’re looking at whether they’re going to have the cash and what the Forex rate is doing. They’re only buying hand to mouth.”

The Russian speaker who kicked off the proceedings by calling for less politics in grain markets was Eduard Zernin, chairman of Rusgrain Union, the Russian Union of Grain Exporters. Rusgrain’s 30 members are now responsible for about 80% of Russian grain exports. Zernin’s call for politics to be kept out of the grain trade came as Russian bombs were targeting Ukrainian ports and silos and alternative export routes on the Danube River, and after Russia let the Black Sea Grain Initiative expire in July this year.

A new study by human rights law firm Global Rights Compliance (GRC) found that Russia had “weaponized” food during the conflict and pillaged an estimated $1 billion worth of grain from Ukraine.

Despite the ongoing geopolitical chaos, the latest iteration of IAOM Mideast & Africa also illustrated why the region remains a magnet for companies seeking growth.

Roberto Reggianini, head of Middle East and Africa, Ocrim, said the company recently had signed multiple deals in the Middle East, including large orders from Saudi Arabia. He was optimistic about the outlook for Africa, although he admitted that competition for business was “strong” and conflicts made sales forecasts difficult, illustrated by the outbreak of civil war in Sudan just as Ocrim was planning to complete an order.

He added that wars in the Black Sea and Gaza, coming on the back of a global pandemic, had made investors more cautious.

“Investments are complicated for every company, but we’re in the food industry and people need food,” he added.

Elias El Cheikh, head of Middle East, Bühler, told World Grain the region had been one of the most important markets for Bühler’s grain and milling business for over 50 years.

“Wherever there is demographic growth, there is big potential for our customers — for the flour miller, feed miller, pasta and so on — and we grow with them accordingly,” he said.

Referencing conflicts in the region, he said that investments in the food industry were generally the priority once violence ceased.

“Of course, stability is a very important factor for new and big investments — geopolitical stability and foreign exchange stability,” he added.

Touraj Goudarzi, executive director, sales and projects at Neuero, said Egypt was an excellent location for this year’s conference.

“We have a lot of projects in this region, and it is one of our biggest markets,” he said. “There are countries where we see some risk, but people are still very motivated to invest.”

Most recently, the company won an order for two 600-tonnes-per-hour-capacity ship unloaders to be installed by the end of 2023 at Port Said, Egypt.

Dr. Lutz Popper, scientific director of Müehlenchemie, told World Grain the region was a key market for its products, and Müehlenchemie had supported the IAOM event for more than 20 years. He said the company was currently marketing a new enzyme system for compositive flour that enables the use of maize and cassava in milling and was in high demand last year when wheat prices peaked.

In the conference’s market outlook session, Roland Guiragossian, Algeria & Middle East manager at Intercereales, said France accounted for around 8% of the 210 million tonnes of global wheat trade in the 2022-23 season.

He predicted France would export 17.5 million of its production of 35.1 million tonnes in 2023-24, of which around 2 million tonnes would be shipped to China and some 6 million tonnes to North Africa where demand was strong, partly due to drought conditions.

He also said France would export around 6.7 million tonnes of barley, about half of its output in 2022-23.

Turning to the United States, Ian Flagg, regional vice president at US Wheat Associates, said US wheat production was up in 2023-24 compared to the previous year due to higher prices during the planting seasons but was still below 5-year and 10-year averages.

However, after a good start to the year, the growing season was then interrupted by “extreme dry weather,” especially in Kansas, the country’s biggest hard red winter wheat producer. Indeed, 80% of the Kansas growing region was in severe drought for most of the season, he said.

Flagg was generally bearish on exports, noting that government policy pushed farmers toward crops such as corn and soybeans that offer growers genetically modified varieties and can be used for producing ethanol and biodiesel.

He added that elevated prices and large crops from competing origins were limiting export potential and likely would result in a 50-year low in wheat exports in 2023-24.

Olivier Bougamont, senior wheat and barley trader at Cargill International, said Australian wheat production also had suffered from dry weather, with 2023 being the driest year since 2019. As a result, production is down to around 25 million tonnes this year from the 32 million to 38 million tonnes recorded in each of the previous three seasons. 

In 2023, the states of New South Wales and Victoria had received the best weather while Western Australia had suffered the most from dry conditions.

“Over the last few years, Australian grain export capacity was maxed out for wheat, barley and canola,” he said. “This year exports of these will be a lot lower. There’s less wheat to export, and China is already booking a lot of that capacity.”

Indeed, he said China also had been the leading buyer of Australian wheat in both 2021 and 2022, and in the latter year had purchased 7 million tonnes, reducing availability for alternative markets elsewhere in Asia and further afield.

All eyes at the conference were focused on supplies out of the critical Black Sea region and turmoil in the Middle East.

On the former issue, Indrek Aigro, head of grains at Copenhagen Merchants, said a third of wheat traded globally was now from the Black Sea, with around two-thirds being supplied by Russia.

Even though the Russian wheat crop had fallen to around 91 million to 92 million tonnes this year from over 100 million tonnes the prior season, it was still the second largest output ever and carry-in stocks might allow for a new record in exports this season.

Moreover, Aigro added, war in Ukraine had not prevented Russia from finding buyers, helped by Russian fob prices that now had fallen below the levels of previous seasons despite the imposition of a steep export tax. 

More than 100 countries currently buy Russian wheat with new destinations emerging such as Indonesia.

“The days of sharply declining export flows in the second half of the season seem to be behind us,” he added.

He said Ukraine had an exportable surplus of 13 million to 14 million tonnes this season, while Romania and Bulgaria would be active in export markets. In the 2023-24 season, he predicted Russia would export 50 million tonnes of wheat, Ukraine would export 14 million tonnes, and the EU would be a net exporter of 24 million tonnes.

“The Black Sea region remains a significant factor in the world wheat market due to uncertainties related to war and logistics,” he added. “However, these conditions are not new, and the market has already adjusted to them.”

Of course, risk is not confined to the Black Sea. Asked if conflict in the Middle East might prompt a second Arab Spring, Ahmed Hammouda, chief executive officer, Astra Group, replied that the grain trade and the Middle East were a lot different now than in 2010.

“Today, you’re trading news, you’re trading CNN, you’re trading geopolitical crisis,” he said. “It’s very difficult. But no, I don’t think anybody now can afford another Arabic Spring. I think our nations are exhausted. People are hopeful for a brighter outlook. It can only get more positive from here.”

Michael King is a multi-award-winning journalist as well as a shipping and logistics consultant who has written for World Grain since 2008. He supplies an array of corporate services at mikekingassociates.com.