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Fighting in Ukraine Impacting Wheat Prices, March Renewal of Black Sea Grain Deal “Unclear”

Dow Jones writer Yusuf Khan reported yesterday that, “Ukraine remains key this week for grain and oilseed markets, after Russia launched more missile attacks on the country’s infrastructure.

“Last week, the Ukrainian agricultural ministry said that Ukraine had shipped 5.5 million tons of grains, oilseeds and other products–down 1.3 million tons compared to December 2022.

“‘This downward trend is caused by the artificial blocking of the grain corridor by Russian inspectors,’ it said.”

Also yesterday, Bloomberg writers James Poole and Megan Durisin reported that,

Wheat futures in Chicago traded near the highest level in more than two months on concerns that Russia will intensify its war in Ukraine, posing a threat to planting and harvesting in the key producer and reducing exports through the Black Sea.

“The food staple was down just 0.3% from a close of $8.0075 a bushel on Monday, which was the strongest since Nov. 23. Prices jumped on Friday as Russia launched its biggest barrage of missile attacks on the country so far this year. Infrastructure damage or a worsening of the conflict would hinder shipments, which are running about a third behind the previous season.”

“Wheat Near Two-Month High on Fears War in Ukraine Will Intensify,” by James Poole and Megan Durisin. Bloomberg News (February 13, 2023).

Poole and Durisin added that, “That export pace has improved from the start of the season as the Black Sea Grain Initiative bolsters seaborne shipments. The deal is up for renewal in mid-March and its future is unclear. The UN’s coordinator for the initiative called for an extension in meetings with senior government officials and diplomats last week, according to a press briefing.”

And Dow Jones writer Kirk Maltais reported on Monday that, “The Wall Street Journal reports that Russia has advanced through Ukrainian resistance in the city of Bakhmut, this while fortifying its own defensive positions in the southern portion of the country. The increased fighting provided support for wheat Monday. ‘Fears of deliveries of wheat from the Black Sea are surfacing again,’ said Jack Scoville of Price Futures Group. Meanwhile, some agencies are reducing their outlook for the Russian wheat crop, although expected production remains high.”

Elsewhere, Reuters writer Caleb Davis reported this week that, “Russia said on Monday that it would be ‘inappropriate’ to extend the Black Sea grain deal unless sanctions affecting its agricultural exports are lifted and other issues are resolved.”

“The agreement, brokered by the United Nations and Turkey, was extended by a further 120 days in November and is up for renewal again next month, but Russia has signalled that it is unhappy with some aspects of the deal and asked for sanctions affecting its agricultural exports to be lifted,” the Reuters article said.

World Agricultural Supply and Demand Estimates at a Glance. USDA- Economic Research Service (February 9, 2023).

Late last week, Reuters writer Pavel Polityuk reported that, “Ukraine’s agriculture ministry has proposed increasing the minimal tonnage of ships which carry grain and vegetable oil from the country via a grain corridor, aiming to boost exports despite opposition from Russia, it said on Friday.”

Polityuk explained that, “Ukraine’s agricultural ministry said in a statement that due to the slowdown in inspections in the Bosphorus a queue of 108 vessels formed on Feb. 9.

“It said that to ‘reduce downtime and increase exports’ the minimum tonnage of vessels could be increased to 25,000 tonnes from 20,000 tonnes for grains and to 10,000 tonnes from 6,000 tonnes for vegetable oils.”

In a separate Reuters article yesterday, Pavel Polityuk reported that, “Ukraine grain exports in the 2022/23 season, which runs through to June, are down 28.7% to 29.2 million tonnes so far, due to a smaller harvest and logistical difficulties caused by the Russian invasion, agriculture ministry data showed on Monday.”

Last week, Polityuk reported that, “Ukrainian farms harvested 53.7 million tonnes of grain in bunker weight from 97% of the expected area, the agriculture ministry said on Friday.”

Meanwhile, Reuters writer Naveen Thukral reported today that, “Chicago wheat and corn futures slid for the first time in three sessions on Tuesday, although concerns over supplies from the Black Sea region provided a floor under the market.”

Thukral pointed out that, “Corn and wheat futures have climbed in recent sessions as concerns intensified that fighting in Ukraine could threaten the agreement for the shipping channel for Ukraine’s grain exports, which expires in March.”

Keith Good Photo

Keith Good is the Farm Policy News editor for the farmdoc project. He has previously worked for the USDA’s National Agricultural Statistics Service, and compiled the daily News Summary from 2003-2015. He is a graduate of Purdue University (M.S.- Agricultural Economics), and Southern Illinois University School of Law.

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