Wheat Climbs to Highest Price Since June as Black Sea Tensions Rise; Transportation Variables in Focus

Bloomberg writers Kim Chipman and Megan Durisin reported yesterday that, “Wheat closed at the highest price since June as traders considered a worsening Russia-Ukraine war against lackluster US grain demand.

“The futures climbed as much as 7.9% in Chicago, within cents of the daily exchange limit, before ultimately settling up 6.6% after explosions rocked the Ukrainian capital Kyiv. Russia has threatened further missile attacks.

“The intensifying conflict calls into question whether the two sides will agree to extend a Ukraine grain-export deal that’s set to expire in about a month. The warring nations are critically important suppliers of wheat and other crops worldwide.”

Also yesterday, Dow Jones writer Kirk Maltais reported that, “Wheat futures on the CBOT surged as Russia unleashed an intense wave of missile strikes in Ukraine on Monday. The Wall Street Journal reports that of at least 84 missiles that were fired at Ukrainian cities, 43 were intercepted, according to the general staff of Ukraine’s armed forces. The timing of the offensive comes as the grain export deal draws to a close–with renewal of the agreement seen as unlikely. ‘The recent turn in events means that getting the two parties in the same room may very well be a challenge,’ said Richard Buttenshaw of Marex in a note.”

And Reuters writer P.J. Huffstutter reported yesterday that, “Chicago wheat and corn futures on Monday surged to months-high prices amid growing concerns that an escalation in the fighting between Russia and Ukraine could further disrupt grain shipments from Black Sea ports.”

Meanwhile, Reuters writers Jonathan Spicer and Can Sezer reported today that, “With nearly 100 grain-laden ships reaching towards the horizon off Istanbul, the U.N. official overseeing exports from Ukraine is asking Russia and other parties to end ‘full-blown’ inspections of outgoing vessels to ease the backlog.

Ukraine has exported more than 6.8 million tonnes of grain and other foodstuffs, about a third of its storage, since a sea corridor from the war-torn country opened in July.

“The U.N. says the safe passage deal signed by Moscow and Kyiv eased a global food crisis. But as more shippers have joined, the handful of teams inspecting cargo and crew transiting Turkish waters started to fall behind, leaving scores of tankers anchored in the Marmara Sea.”

The Reuters article explained that, “On Monday, 97 outgoing ships carrying some 2.1 million tonnes of cargo were awaiting inspections, with one held up for 35 days, a Reuters analysis found. Including those returning empty to Ukraine, the JCC said the backlog was 120 last week.

“‘There has to be a check, but that check need not be a full blown inspection,’ Abdulla said, adding: ‘I have suggested … maybe a spot check or check particular vessels.'”

Elsewhere, Financial Times writers Ben Hall and Christopher Miller reported today that, “Air raid sirens sounded across Ukraine in the early hours of Tuesday as Russia launched missile strikes for the second day running, although it was unclear how many struck their targets.

“Kyiv said some of the missiles had been intercepted by its air defences.

“A government app that warns residents when Russian missiles have entered Ukrainian airspace showed all 24 of the country’s provinces on red alert.”

In other market news, Bloomberg writers Tarso Veloso Ribeiro and Agnieszka de Sousa reported yesterday that, “A combination of a strong US dollar, high commodity prices and rising interest rates are creating a mix that’s driving a ‘demand destruction’ in crops, according to the head of Cargill Inc.’s World Trading Group.

“Developing countries in parts of North Africa, Middle East and southeast Asia are struggling with access to dollars that are needed for importing commodities, said Alex Sanfeliu, world trading head for Cargill in Geneva. That means in the upcoming months global trade flows may be reduced by 5% to 6% for wheat and 2% to 3% for corn and soybean meal, he said.”

In a closer look at transportation variables, Bloomberg writers Michael Hirtzer and Diego Lasarte reported yesterday that, “The logjam of thousands of barges and boats backed up along the Mississippi River because of extremely low water levels showed some signs of easing on Monday.

“The US Coast Guard said an entire queue of vessels that were stuck at Stack Island after ships started running aground had been cleared. But 22 vessels and 392 barges were still waiting to move southbound, according to a statement. That’s still an improvement from over the weekend, when more than 2,000 barges were stalled.”

Reuters writer Karl Plume reported yesterday that, “Low water is expected to remain a problem for barge shippers amid mostly dry weather in the near term forecast.

“The Mississippi River at Memphis is forecast to recede over the next two weeks to multi-year lows, possibly challenging a low-water record set in 1988 by late October, according to the National Weather Service river forecast.”

Also yesterday, Associated Press writer Josh Funk reported that, “The U.S.’s third largest railroad union rejected a deal with employers Monday, renewing the possibility of a strike that could cripple the economy. Both sides will return to the bargaining table before that happens.

“Over half of track maintenance workers represented by the Brotherhood of Maintenance of Way Employes Division who voted opposed the five-year contract despite 24% raises and $5,000 in bonuses. Union President Tony Cardwell said the railroads didn’t do enough to address the lack of paid time off — particularly sick time — and working conditions after the major railroads eliminated nearly one-third of their jobs over the past six years.”

Nonetheless, the AP article pointed out that, “The group that represents the railroads in negotiations said they were disappointed the union rejected the agreement, but emphasized that no immediate threat of a strike exists because the union agreed to keep working for now.”