Wheat Climbs Over 5 Percent to 2-Week High as Russia Suspends Black Sea Agreement

A combine harvests wheat in a field near the village of Zghurivka, in the Kyiv region, Ukraine, on Aug. 9, 2022. Viacheslav Musiienko/Reuters

Wheat prices spiked after a Russian announcement that it would withdraw from the Black Sea export agreement, a decision which is expected to have a negative impact on the market.

On Monday, the most active contract on the Chicago Board of Trade (CBOT) rose by 5.7 percent as of 4:16 a.m. EDT, to trade at around $8.77 a bushel. Prices earlier had hit a high of $8.93 a bushel, which is its highest level since Oct. 14. Corn and soybean prices were also up.

“This is an inflationary move supporting prices of wheat and corn,” one Singapore-based trader told Reuters. “Prices have risen, but further gains will depend on how the situation unfolds.”

After Russia’s invasion of Ukraine in late February, grain shipments from Kyiv were halted. Ukraine is one of the major global suppliers of wheat. The Black Sea Grain Initiative was an agreement signed, on July 22, between Russia and Ukraine with Turkey and the United Nations.

The agreement allowed for the safe export of grain from certain ports. As of Oct. 30, more than 9.5 million tons of grain and foodstuffs have moved from Ukrainian ports under the initiative, according to data from the United Nations.

On Saturday, Russia announced that it is suspending the agreement, citing an alleged drone attack made by Ukraine against Moscow’s Black Sea Fleet ships off the coast of occupied Crimea.

The Russian decision puts at risk hundreds of thousands of tons of wheat that are booked for delivery to Africa and the Middle East, traders told Reuters. In addition, Ukraine’s corn exports to Europe are also expected to be affected.

A ship carrying 40,000 tons of wheat headed for Ethiopia under a UN aid program was stuck in Ukraine on Sunday, according to Oleksandr Kubrakov, Ukraine’s minister of infrastructure.

Ukraine’s Alleged Attack

Ukraine has denied responsibility for the attack against the Russian ships, insisting that Moscow mishandled their own weapons.

In a tweet on Oct. 30, Dmytro Kuleba, from Ukraine’s Ministry of Foreign Affairs, accused Russia of having “planned this well in advance” and pointed out that Kremlin’s action blocks 2 million tons of grains on 176 vessels already at sea.

“The current queue with grain has accumulated in the Black Sea since September, when Russia started deliberately delaying the functioning of the corridor and seeking to undermine the deal. Russia took the decision to resume its hunger games long ago and now tries to justify it,” Kuleba said.

A total of 12 cargo ships were due to leave the Black Sea ports controlled by Ukraine on Oct. 31, with four ships heading to these ports. Two ships loaded with grains reportedly left the ports on Monday, according to a Euro News report that cited data from the Marine Traffic website.

The grain deal was set to expire on Nov. 19. A day before Russia pulled out from the agreement, UN Secretary-General Antonio Guterres had asked both Russia and Ukraine to renew the export deal. Following Russia’s decision, Guterres delayed a foreign visit in a bid to try to revive the agreement.