Wheat prices soar as Black Sea situation deteriorates further

Wheat prices have risen sharply on global markets after Russia said it would treat ships heading for Ukrainian ports as potential military targets.

Wheat prices on the European stock exchange rose by 8.2% on Wednesday from the previous day, while corn prices were up 5.4%. US wheat futures increased by 8.5% on Wednesday, the highest daily percentage rise since just after Russia’s invasion of Ukraine in February 2022.

The end of the deal had been widely anticipated in the market, but the Russian attacks on the Ukrainian Black Sea grain facilities, and its military threat to commercial shipping, had not. Russia began targeting Ukraine’s ports in the early hours of Tuesday within hours of its withdrawal from the grain deal.

“The grain infrastructure of international and Ukrainian traders and carriers Kernel, Viterra, CMA CGM Group was damaged. Tanks and berths of the Odesa port were also damaged,” according to a Ukrainian government statement.

Ukrainian Agriculture Minister Mykola Solskyi said Russian air strikes had destroyed 60,000 tonnes of grain and damaged considerable parts of grain export infrastructure.

“From 00:00 Moscow time on July 20th 2023 all vessels sailing on the Black Sea to Ukrainian ports will be regarded as potential carriers of military cargo,” the Russian defence ministry said.

“Flag states of such vessels will be considered to be involved in the Ukrainian conflict on the side of the Kyiv regime,” it added.

Ukraine had said on Wednesday that it was establishing a temporary shipping route via Romania in the wake of the end of the Black Sea Grain Initiative, with the goal of unblocking international shipping in the northwestern part of the Black Sea, according to an official letter from Vasyl Shkurakov, Ukraine’s acting minister for communities, territories and infrastructure development, to the International Maritime Organization (IMO).

Romania has been handling about a third of Ukraine’s grain exports since the war started, but marine traffic through the port of Constanta had been expected to rise. One question being asked is whether Russia has the military capability and the political will to attack vessels cleaving to a relatively coastal route south-west from Odesa, Chornomorsk and Yuzhne to Constanta.

More likely, it would appear from Russia’s actions on Monday night and Tuesday night, are attacks on the putative grain exports before they get as far as any ship.

White House National Security Council spokesman Adam Hodge claimed that Russia was considering attacking civilian ships on the Black Sea and then putting the blame on Ukrainian forces. “Our information indicates that Russia laid additional sea mines in the approaches to Ukrainian ports. We believe that this is a coordinated effort to justify any attacks against civilian ships in the Black Sea and lay blame on Ukraine for these attacks”, he said.

In an attempt to regain some control of the international propaganda war, much of which is aimed at the global south, Russia said on Wednesday that the UN had three months to implement the terms of a memorandum that would facilitate Russian agricultural exports if it wanted Moscow to resume talks about allowing Ukrainian grain exports to restart, but that the UN did nothing. An EU proposal later taken up by the UN to create a new “subsidiary” bank in Russia specifically for fertilizer and grain exports from Russia, that might some time in the future be connected to the international payments network SWIFT, was rejected by Russia as a delaying tactic.

Meanwhile, and for obscure reasons, Russia had banned any traffic through the Kerch Strait either into or out of the Sea of Azov ever since an attack on the Russia-controlled bridge across the strait. Queues have been building up in the Sea of Azov and in the Black Sea. Many of these vessels would be either carrying grain to international markets, or be on their way to Russian ports such as Novorossiysk to pick it up.

On Thursday Russia lifted its restrictions for cargo vessels transiting the Kerch Strait, reported Reuters, citing three unnamed industry sources. One of the sources said that navigation was open during daylight hours only.

The movement of cargo vessels through the Kerch Strait was suspended by Russian authorities on July 16th following drone attacks on the Crimean port of Sevastopol.