Grain market braces for price spike as Black Sea corridor uncertain

Grain market braces for price spike as Black Sea corridor uncertain

  • Moscow’s withdrawal from deal rekindles global supply fears
  • Halt of grain purchases for Ukrainian seaports, broker says
  • The situation is unclear as other parts of the corridor are planning inspections

PARIS, Oct 30 (Reuters) – Wheat futures are set to jump on Monday as Russia’s withdrawal from a Black Sea corridor deal puts Ukrainian exports at risk, analysts said.

Moscow suspended its participation in the Black Sea deal on Saturday, in response to what it called a major Ukrainian drone attack on its fleet in Russia’s annexed Crimea.

Kyiv said Russia was making an excuse for a prepared exit from the deal while Washington accused Moscow of weaponizing food.

Wheat markets have been very sensitive to developments following Moscow’s invasion of Ukraine eight months ago, as the two countries are among the world’s largest wheat exporters.

Ukraine is also a major maize supplier.

The establishment of the corridor, which enabled the shipment of more than 9 million tonnes of grain and oilseed products from Ukrainian ports, helped stabilize grain markets and dampen world prices after reaching record highs.

This relative calm should end when Chicago and Paris wheat, the two most active wheat futures in the world, begin their trading week on Monday.

“Russia’s announcement is certainly bullish for prices and the start of the week is very likely to see prices go up, just because less grain is going to come out of Ukraine,” said Arthur Portier of consultancy Agritel. .

The purchase of grain for Ukraine’s Black Sea ports has stopped following Russia’s decision, a Ukrainian broker has said.

Ukraine’s infrastructure ministry said on Sunday that 218 vessels were “effectively blocked” by Russia’s decision to suspend its participation in the grain export deal.

The corridor suspension could trigger a buying rush in Chicago, where investment funds have a net short position.

CME Group is applying daily limits on price movement, with the current cap of $0.70 on its Chicago wheat contract implying a maximum possible upside of 8.4% from Friday’s close of $8.29- 1/4 a bushel.

However, news that the United Nations, Turkey and Ukraine – the other parties to the corridor deal – had agreed on a plan for ship movements and inspections on October 31 on Sunday dampened the reaction. to the announcement made the day before by Russia.

“There were reports of wheat hitting the limit tonight, but given the relative calm following the drone attack, I think 25 cents of wheat is fair,” said Joe Davis, director of product sales at base at Futures International.

Market players are watching to see if the corridor deal can be salvaged, as the UN continues its negotiating efforts.

Carlos Mera, head of agricultural commodity markets research at Rabobank, said wheat futures could jump 5% to 10%, but the reaction could fade as Moscow had partly anticipated withdrawal from the agreement as Russian exports increased.

“There is an increase in exports from Russia, so in the short term the availability could still be there from the Black Sea,” he said.

But with no corridor, some traders and analysts say Russia has no additional logistical capacity to fill the void, while severe weather raises concerns about crop supplies for southern hemisphere exporters. , Argentina and Australia.

“The end of the corridor will inevitably drive up prices and that makes the situation very bad for importers,” Portier said.

Reporting by Gus Trompiz, additional reporting by Pavel Polityuk; edited by Barbara Lewis and Diane Craft

Our standards: The Thomson Reuters Trust Principles.

Gus Trompiz

Thomson Reuters

Paris-based reporter covering commodities, primarily agriculture, examining production and its impact on health, the economy and the environment.

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