Grain price rises due to “escalation risk” in Ukraine

No ship dares to anchor in Ukrainian Black Sea ports to load grain after Russia failed to guarantee a safe corridor and bombed export facilities, causing a sharp increase in agricultural prices on European markets.

Two days after Russia refused to redirect the agreement on agricultural exports from Ukrainewhich allowed the output of about 33 million tons of grains in one year, the markets began to react.

The price of soft wheat closed with strong increases on Wednesday, up to 253.75 euros per ton in the Euronext market, adding 8.2% during the day, after the intensification of Russian bombings in Ukraine.

Prices thus returned to their level at the beginning of April, reacting to the escalation of the conflict after the suspension of the maritime corridor to transport grains and the threat of Moscow against any ship that goes to Ukraineconsidered as of Thursday as “potential warships”.

On Monday the market had barely echoed the news of the closure of this maritime route, which at the time provided half of Ukrainian exports, according to Andrei Sizovof the signature SovEcon.

But after the Russian airstrikes against Odessa and Chornomorsk, two of the three Ukrainian ports in the corridor, and the news that insurers “they suspended coverage” of the risks in the Black Sea, the concern increased, he pointed out Damien Vercambrerunner of Inter-Courtage.

Uncertainty

Ukrainian President Volodymyr Zelensky on Wednesday accused Russia of aiming “deliberately” the infrastructures used for the export of grains through the Black Sea.

The shelling destroyed 60,000 tons of grain in the port of Chornomorsk, according to the Ukrainian Ministry of Agriculture.

Zelensky He said on Monday he was determined to continue seaborne exports, but Russia warned of “risks” in the Black Sea, where there were no longer “security guarantees”.

“With intensifying bombing, Russia is giving her no chance to go down the corridor without her. The message is very clear and the markets are beginning to accept it“, he claimed Damien Vercambre.

Ukraine on Wednesday proposed creating UN-mandated international military patrols to ensure the safety of its grain exports through the Black Sea, according to a presidential adviser.

But Russia He warned that he will consider those heading towards Ukraine as possible military vessels.

According to Sebastien Ponceletspecialist in grains of the firm Agritel“a new page of uncertainty opens in the cereal market”.

However, he asserts that “We are not facing the shock that the markets experienced after the invasion of Ukraine in February 2022″, which pushed the price of wheat to more than 400 euros per tonne.

Besides, “Ukrainian operators claim to have the capacity to export up to 3.8 million tons per month by alternative routes – land, rail and river – via the Danube“, he pointed vercambre.

But “we are witnessing an escalation at the moment and it could continue in the coming weeks or months”, he warned Andrei Sizov.

The latter would not be surprised if the Ukrainians “attempt to disrupt the transport of Russian grain, as a retaliatory measure” to the attacks on Odessa.

meteorological risks

Until now, “it was important for Russia to preserve the corridor to protect its relations with Türkiye and China”, which buy a significant proportion of their Russian exports and were among the top three countries benefiting from Ukrainian exports through the corridor, he noted. michael zuzoloof Global Commodities Analytics and Consulting.

But, “relations between these two countries and Russia have deteriorated” recently, especially with the recent green light from Turkey to Sweden’s entry into the NATOhe added.

In his opinion, world prices do not sufficiently reflect risks, given the continued unfavorable weather conditions in the United States and Southeast Asia.