Grain market braces for price hike due to Black Sea corridor shutdown

Grain purchases for Ukrainian seaports halt, broker saysDrought and torrential rains disrupt southern hemisphere suppliesExport from Russia increases

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

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

Kiev said Russia made up an excuse for a planned exit from the accord, while Washington accused Moscow of arming food.

Wheat markets have been very sensitive to developments in Moscow’s eight-month-old invasion of Ukraine, as both countries are among the world’s largest wheat exporters.

Ukraine is also a major supplier of maize.

The creation of the corridor, which allowed more than 9 million tons of grain and oilseeds to be shipped from Ukrainian ports, helped stabilize grain markets and curb global prices after hitting record levels.

That relative calm is likely to end as Chicago and Paris wheat, the world’s two most active wheat futures contracts, begin their trading week on Monday.

“Russia’s announcement is definitely bullish for prices and it is very likely that prices will rise early in the week simply because less grain will come from Ukraine,” said Arthur Portier of Agritel consultancy.

Grain purchases for Black Sea ports in Ukraine have been halted following Russia’s decision, a Ukrainian broker said.

Droughts in Argentina and torrential rains in Eastern Australia have heightened supply concerns as they cast doubt on the upcoming harvests of wheat exporters in the southern hemisphere.

At the same time, the rapid early season deliveries from the European Union have reduced the surplus there.

“The problem is that, among other major exporting countries, the supply of wheat is declining,” Portier said.

The suspension of the corridor could lead to a buying storm in Chicago, where investment funds have a net short position.

CME Group applies daily limits on price movements, with the current $0.70 cap on its Chicago wheat contract implying a maximum possible increase of 8.4% compared to Friday’s close of $8.29-1/4 per week. bushel.

Carlos Mera, head of research into agricultural commodities markets at Rabobank, said wheat futures could rise 5% to 10%, but the reaction could slow down as Moscow had partially anticipated the end of the deal, while Russian exports have increased.

“There is an increasing export from Russia, so in the short term there may still be availability from the Black Sea,” he said.

Market participants will also look to salvage the corridor deal as the UN continues negotiating efforts.

In the absence of the corridor, some traders and analysts say Russia lacks additional logistics capacity to fill the gap, increasing the risk of continued high prices.

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

Ukraine’s Ministry of Infrastructure said on Sunday that 218 ships were “effectively blocked” by Russia’s decision to suspend its participation in the grain export agreement.

Reporting by Gus Trompiz, additional reporting by Pavel Polityuk; edit by Barbara Lewis

Our Standards: The Thomson Reuters Trust Principles.

Gus Trompiz

Thomson Reuters

A Paris-based reporter on commodities, mainly agriculture, looking at production and its impact on health, the economy and the environment.

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