A Year in Grain Trade
"Every ship we trade is needed immediately"Jan Jaensch and his team from BayWa Agrarhandel (BAH) trade in rapeseed, malting barley and, above all, wheat from north-eastern Germany. The products are handled in the ports of Mukran and Vierow, half of which belong to BAH. A conversation about the year in grain trade - the grain corridor in the Black Sea, the role of German arable farmers and the difference between bread wheat and mixed wheat.
Mr Jaensch, BAH exports grain via the ports of Vierow and Mukran to Europe and all over the world, for example to Cuba. What does the path of wheat from Saxony to the Caribbean look like?
We have many farmers in eastern Germany with several thousand hectares of land whose harvests we bundle. Some of them bring their goods to the collection point in Reichenbach in Saxony, for example. There we load the grain onto so-called block trains with 30 wagons. Each wagon holds up to 70 tonnes, a whole train up to 2100 tonnes.
As far as I know, you trade and export mostly wheat, right?
Yes, mostly it is wheat. The loaded block train then travels from Reichenbach to the ports at night: I like to talk about our night conveyor belt to the Baltic Sea. In Vierow or Mukran, up to 8,000 tonnes of grain can be loaded onto ships every day with the help of conveyor belts and elevators. The Panamax class ships in Mukran currently hold over 40,000 tonnes.
In the dry summer of 2022, barge operators had major problems due to low river levels. Were you also affected?
This mainly affected our colleagues at BayWa Agricutlural Produce, who transport a large part of the flow of goods from southwest Germany on the Danube or Rhine. When we at BAH work with inland vessels, it is on the Mittelland Canal, which is kept navigable with the help of pumps.
What does that mean?
The pumps convey water from the Elbe and Weser into the Mittelland Canal.
What role does the truck play as a means of transport?
Truck logistics are becoming more and more expensive, there is a shortage of drivers. From our point of view, rail is on the rise. We have been relying heavily on rail for grain transport for years. That will remain the case.
Where do the ships with the wheat go from Mukran and Vierow?
In Vierow we load so-called coasters that take wheat to Scandinavia, England or Spain. These ships mainly transport mixed wheat or elite wheat, i.e. better qualities that can be used to upgrade lots with poorer qualities. Via Mukran, we transport bread wheat all over the world on Panamax ships, for example to Cuba.
What happens to the bread wheat in Cuba?
It goes directly from the container ship in Havana to the mill so that the bakeries have flour for baking bread.
And what's the deal with the mixed wheat?
Britain, for example, is a green, wet island. Farmers there don't always produce the great, protein-rich grain they need. At the same time, the British like to eat toast. So they need protein-rich wheat from Germany to mix up their own grain with before the flour is milled.
So they can bake their beloved toast.
Exactly. Many people don't realise it, but here in Germany we have more sun and an excellent climate to grow great wheat. Unlike in the US, Australia or Russia, our farmers get up to ten tonnes of wheat from a hectare.
How much is it in Eastern Europe?
Our colleagues there are increasing their yields, but they are still at about 3.5 tonnes per hectare. We must therefore do everything we can to continue producing at that level. From my point of view, we are even obliged to produce as much grain as possible, even with the use of fertilisers. Other countries benefit from this. Our colleagues at BayWa Agrarerzeugnisse, for example, transport a lot of mixed wheat from Thuringia and Bavaria to Italy. But we also transport this wheat to France or to the west of Germany. There, it is mixed in to bake certain burger patties or baguettes, for example.
How would you describe the grain trading year 2022?
We have a political market. Prices rose to sometimes extreme heights because of the Ukraine war. We needed up to 50 percent more money to be able to buy the farmers' harvest at the higher price level. In addition, we had a low-protein year - among other things, because farmers saved on fertiliser. The dry weather also resulted in lower protein content and a weaker harvest in some cases.
How has the war in Ukraine changed trade flows?
We are currently delivering grain from Central Europe to Africa that would otherwise have come there from Ukraine. Of the 100 per cent of bread wheat that we would otherwise deliver to the African continent by the end of June 2023, we have already delivered a good 75 per cent so far. This means that it will be very exciting in June of next year to see whether there will still be enough bread wheat for Africa.
Martin Unterschütz is head of grain trading at BayWa Agricultural Products. He recently said in a lecture that in June 2022 there were still a good 80 million tonnes of grain from old harvests in stock worldwide - 30 million tonnes of which were in Ukraine and Russia.
That is absolutely correct. If at least some of these 30 million tonnes had not come out of Ukraine, that would have been very bad.
Then, in July 2022, the so-called grain corridor was established, and on 19 November it was extended again for almost four months. Ukraine is exporting grain again.
Yes, in August, 1.5 million tonnes of wheat already went via Odessa to the world, and in September, allegedly already 3.9 million tonnes.
What would have happened if the corridor had not worked out?
Then we would probably have a grain price of 400 instead of 300 euros per tonne. We would have had to continue exporting the grain of the old and also the new harvest over land and on rivers. A laborious thing, because capacities are limited.
What impact would a price of 400 euros per tonne have on our food supply?
The European mills could still cope with the higher prices. But the people in Africa would have to do without calories, which could lead to political unrest. We have seen this time and again in the past decades.
Many experts say that we have been living from hand to mouth with cereals in the world for a long time.
I completely underline that. We are feeding eight billion people today! The amount of grain produced worldwide is close to the amount consumed worldwide. Every ship we trade is needed immediately. There have been no significant stocks of grain for years. That is why I also criticise our federal government when it limits the use of artificial fertilisers. We have to be grateful that we have it. From my point of view, we are even obliged to use it in the sense of feeding the world - no one in the world harvests this amount of grain in this excellent quality.