According to analysts polled by Reuters, the grain market is preparing for higher prices following Russia’s withdrawal from the Black Sea Corridor agreement, a decision that threatens Ukrainian exports.

Moscow on Saturday suspended its participation in the Black Sea agreement in response to what it called a major attack by Ukrainian drones on its navy in Russia-annexed Crimea.

Kyiv called Russia’s accusations a pretext for ready withdrawal from the agreement, and Washington accused Moscow of using food as a weapon.

Wheat markets were highly sensitive to the events of Russia’s eight-month invasion of Ukraine, as both countries are among the world’s largest wheat exporters.

Ukraine is also an important supplier of corn.

The creation of the corridor, which made it possible to transport more than 9 million tons of grain and oil products from Ukrainian ports, helped stabilize grain markets and reduce world prices after reaching record levels.

This relative lull is likely to end when Chicago and Paris wheat, the world’s two most active wheat futures, begin a new week of trading.

“Russia’s announcement will undoubtedly cause prices to rise, as it is very likely that prices will rise earlier in the week simply because less grain will be coming from Ukraine,” said Arthur Portier of consultancy Agritel.

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

Drought in Argentina and torrential rains in eastern Australia have also added to supply problems as they cast doubt on future harvests for southern hemisphere wheat exporters.

At the same time, fast deliveries from the European Union at the start of the season mean that the surplus there has eased.

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

The suspension of the corridor could trigger a wave of buying in Chicago, where mutual funds have a net short position.

CME Group applies daily limits on price swings, with the current limit on the Chicago wheat contract at $0.70 representing a maximum possible gain of 8.4 percent from Friday’s close of $8.29-1/4 a bushel.

Carlos Mera, head of agricultural commodities research at Rabobank, said wheat futures could rise 5% to 10%, but the reaction could fade partly because Moscow is expected to withdraw from the deal and Russian exports rose.

“Exports from Russia are growing, so there may still be availability from the Black Sea in the short term,” he said.

Market participants will also be watching to see if the corridor deal can be saved as the UN continues negotiations.

Without the corridor, some traders and analysts say Russia lacks additional logistics capacity to fill the gap, raising the risk of persistently high prices.

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

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

Susa: news.ro

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