Grain export hopes tempered after Odesa hit by missiles

Following last week’s agreement on a safe corridor for grains exports in the Black Sea, Ukrainian traders remain uncertain

Hopes that exports of corn, wheat and sunflower could be restored in Ukraine’s deep water ports following the signing of a four-way deal including Ukraine and Russia were left hanging in the balance after the key port of Odesa was struck by missiles on Saturday, July 23.

Russia has denied launching the missiles, but widespread media reports suggest that four Russian-designed ‘kalibr’ cruise missiles were launched in the attack, with two of them striking port facilities in Odesa just hours after a historic agreement had been signed in Istanbul.

Representatives of Ukraine, Russia, Turkey and the UN had hailed the agreement to allow grain exports from Odesa’s key deep water ports. Yuzhny and Chornomorsk had spoken of hopes that it could raise the current export pace from 1.5-2 million tonnes per month to around 5 million tonnes.

However, those hopes hang in the balance now, following the missile strike and a subsequent fire in Odesa.

International voices roundly condemned the attack, with the United Nations saying Secretary-General Antonio Guterres “unequivocally condemns reported strikes today in the Ukrainian port of Odesa” and said full implementation of the deal was “imperative.”

In an emotive statement from the Ukrainian foreign affairs ministry, the government accused Russian president Vladimir Putin of “spitting in the eye of the UN” and warned that failure to implement the deal would shorten the world’s food supply.

“In case of failure to fulfill the agreements reached, Russia will bear full responsibility for the deepening of the global food crisis,” the statement read.

Ukrainian trade sources had already highlighted the challenges facing the agreement’s implementation, with insurance and reluctant shipowners likely to be key obstacles that need to be overcome if exports are to return to five million tonnes per month.

The missile strike is unlikely to reassure shipowners who are already thought to be wary of a return to Black Sea waters during an active invasion by Russian forces. Insurance agreements for those who are prepared to make the journey could take time to redraw.

Trade sources also warned not to expect a return to handysize and Panamax export ships of 40,000 to 70,000 tonnes cargo sizes – with much of the vessels engaged likely to be drawn from Turkey’s coaster-sized vessels of around 10,000 tonnes capacity.

The Friday agreement was seen as a breakthrough in relieving some of the mounting challenges facing the world food supply, after Russia’s invasion of Ukraine in February led to significant disruption in one of the world’s main food and animal feed exporting regions.

Expectations that exports could be restored were key in cutting values on major international pricing benchmarks, with the CME’s corn and wheat futures contracts, along with the European milling wheat futures listed on Euronext all reporting heavy losses at Friday’s close.

Keep up to date with the latest grains and oilseeds news, price trends and forecasts by visiting Fastmarkets Agriculture.

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