The chief executive of Australia’s largest grains company has warned that global supply chain disruptions caused by Russia’s war on Ukraine could persist for years, as investors cheered the company’s plans to lift shareholder returns and benefit from another bumper crop.
Russia’s ongoing invasion of Ukraine, which began in late February, has triggered global shortages of essential commodities from fuel and oil to wheat and fertiliser and is now threatening to create a global food crisis.
Ukraine and Russia, together known as the “world’s breadbasket”, produce roughly 30 per cent of the world’s grains – but Russia’s destruction of infrastructure and blockade of Ukrainian ports means grain exports have been damaged or unable to depart the country. Global food prices are now 30 per cent more expensive than they were this time last year, United Nations figures show.
GrainCorp chief executive Robert Spurway told investors on Tuesday the extent of the disruption was “very difficult to predict” and could potentially linger for more than three years.
“First of all, the harvest … the profits in the ground in Ukraine at the moment is significantly reduced through the impact of war. A lot of the grain in Ukraine also comes from eastern areas under conflict and control of Russian forces,” Spurway said.
“Also, infrastructure has been severely damaged, so road, rail and port infrastructure, even in the event that peace breaks out, will take some time to recover.
“So I think if you’d listened to any commentator across Europe or the world in grain, food or energy markets generally, it’s very easy to see disruption for at least the next two or three years,” Spurway added. “And … it could well be longer than that.”
Demand for Australian grain has skyrocketed as the war in the Black Sea region wages on. A month ago, GrainCorp announced a record half-year profit of $246 million, up 452 per cent from the same time last year, as well as a sharp increase in dividends. In April, it upgraded its full-year earnings guidance to $590 million-$670 million, a 25 per cent increase on its February predictions.
In the presentation to investors, Graincorp said it was positioned for “substantial outperformance” bumper crop years, and raised the prospect of a third successive bumper crop for the grains market in 2022-23.