Wheat and corn futures traded in Chicago jumped on Monday following Russia’s withdrawal from a deal that allowed the passage of million of tonnes of grain via southern Ukraine.
The most heavily traded wheat contract on the Chicago Board of Trade rose 5.5 per cent to $8.70 per bushel on Monday morning, after hitting a high of about $8.93 a bushel earlier in the day. Corn contracts rose 2.4 per cent to $6.97 per bushel.
Experts had warned Russia’s withdrawal from the deal would hit poorer nations, with the International Rescue Committee saying it would have “catastrophic consequences” for food supplies.
On Saturday, the Kremlin suspended its participation in the UN-backed deal with Kyiv, blaming a weekend attack on ships in a port within territory annexed from Ukraine in 2014, a reasoning the latter called a “false pretext”.
Under the deal, Moscow had guaranteed safe passage of grain-carrying cargo ships from previously blockaded Black Sea ports. The suspension immediately affected 218 ships, Ukrainian authorities said. Of those, 95 had already left its ports, 101 were waiting to collect grain and 22 were loaded and waiting to set sail.
The Kremlin’s announcement surprised grain traders and analysts who, while doubtful that the July deal would endure beyond its mid-November deadline, did not expect a sudden termination.
Dennis Voznesenski, an agriculture analyst with Rabobank, said that the short-term impact of the Russian move was evident in the surge in prices, which could be sustained if the deal is not salvaged.
Ukraine, long known as the breadbasket of Europe, is the world’s fifth-largest exporter of wheat.
“If you’re a Ukrainian farmer, you have no incentive to plant the longer this goes on because the export market has gone,” said Voznesenski.
Analysts said that the G20 meeting in Bali in two weeks could be a key moment for wheat markets as it could ease tensions.
Voznesenski added that the situation had been exacerbated by flooding and storms in Australia, another major wheat exporter.
The Australian supply could have acted as a buffer against price rises, Voznesenski said, but the volume and quality of the harvest may have been hit, adding to the price squeeze.
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