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Wheat futures jumped more than 6% on Monday, October 31, as market participants weighed the impact of the Russian withdrawal from the accord that had created the Black Sea grain corridor, in a move that may end grain exports from deep-water Ukrainian ports.
The Russian move comes after reports of attacks by drones on ports in the disputed Crimean region that appears to have damaged Russian warships in the port of Sebastopol.
Against the upward momentum, the presence of wet weather finally reaching drier production areas of the Americas acted as a brake on price rises, particularly in the context of recent Russian complaints that had already stoked fears that the corridor could be in jeopardy.
“The recent rain across the US Great Plains and Argentina, last week, is limiting gains in wheat, despite Russia’s no-surprise announcement,” senior grain and oilseed commodity analyst at Futures International Terry Reilly told Fastmarkets Agriculture.
As of 1132 Eastern time, Chicago SRW December futures were up 6.2% on Friday’s settlement at $8.804 per bushel, after earlier jumping as much as 7.7% earlier, while March was up 5.7% at $8.80 per bushel.
Kansas City HRW futures climbed about 3.3% on last Friday’s settlement, with December at $9.55 per bushel, after rising as much as 6.2% in early trading, while March was up 3% at $9.52 per bushel.
“All of the European commercials were long Matif and short Chicago and covered overnight. Now everyone is waiting to see if some kind of corridor without Russian guarantees can be (achieved),” Charlie Sernatinger of ED&F Man told Fastmarkets.
In Europe, the front-month December Euronext milling wheat futures contract, which is often known by its old name of Matif, traded at €347 per tonne, up €9.50 per tonne, while March advanced by €9 to €346.75 per tonne.
The price surge has been less extreme than after Russia launched a barrage of missile attacks on cities across Ukraine on October 10, due to optimism that some arrangement will be reached, allowing Ukraine to continue deep-sea exports and because of precipitation in grain-crowing regions elsewhere.
“Countries have a few weeks to work something out with Russia. Ideally, we would like to see Russia have more flexibility to export fertilizers and grains, but that will come down to what Western countries will do with sanctions,” Reilly said.
The grain corridor agreement was signed on July 22 between Ukraine, Turkey, and the UN, while a mirror agreement was inked with Russia, with a validity of 120 days, meaning the deal is due to run out in late November.
Authorities from the United Nations and the Turkish government say they expect it will take ten inspection groups to check the 40 outbound ships either in or close to Ukrainian ports en route to Istanbul, according to an official statement from the Joint Coordination Center (JCC) overseeing the grain corridor deal.
“If wheat continues to move out of the Black Sea over the short term, we see no reason to get wildly bullish wheat futures. Twelve vessels departed Ukraine today,” Reilly said.
For more information on the current wheat market, take a look at our dedicated page for wheat market insights.