Soon after Russia pulled out of the Black Sea grain initiative, wheat prices soared and Russia followed up with kinetic threats along the Black Sea, updates of which can be found below.
Russia strikes grain terminals, port and apartment blocks in Odesa
“Russia launched an extensive air attack on the Ukrainian city of Odesa on Wednesday, for a second night in row, an assault dubbed by authorities as a ‘hellish’ onslaught meant to destroy the possibility of shipping Ukrainian grain from its ports. The military said the strike hit a grain and oil terminal, damaging tanks and equipment for loading”. (1)
Wheat prices soar after Russia threatens ships
As of Friday, 7/21/23, wheat prices keep rising after Ukraine warns Russia ships in a tit-for-tat response to a similar warning from Moscow. Black Sea ports are a major exit point to global markets.
Source: Bloomberg, HolgerZ
- US wheat futures jumped 8.5% on Wednesday as the Russia-Ukraine war intensified, wheat’s largest daily gain since the early days of Russia’s February 2022 invasion.”
- A considerable part of the grain export infrastructure at Chornomorsk port southwest of Odesa was damaged in an attack, and 60,000 tons of grain were thought destroyed. Meanwhile, Russia said it would presume ships inbound to Ukraine’s Black Sea ports would be seen as potentially carrying military cargoes.
- The benchmark soft red winter wheat contract briefly touched its daily trading limit and hit its highest level in more than three weeks.
- Soybean futures, aside from the prompt month, notched a fifth straight day of gains and hit the highest level in more than a month on forecasts for more hot and dry US Midwest weather.
- Corn futures also strengthened with the December contract peaking at its highest level since June 27.
- Chicago September wheat futures surged 57¢ to close at $7.27¾ a bu.
- Kansas City September wheat added 39½¢ to close at $8.66¾ a bu.
- Minneapolis September wheat climbed 19¾¢ to close at $8.97¼ a bu. (1)
“…if the interruption in supplies leads to a prolonged period of higher prices, the impact will make itself felt around the world in the coming months.”
Wheat prices have risen sharply on global markets after Russia said it would treat ships heading for Ukrainian ports as potential military targets…For the past three nights Russia has bombarded Ukraine’s grain facilities in Odesa and other cities. Moscow also warned that from Thursday any ships going there would be seen as siding with “the Kyiv regime”.
- White House spokesman Adam Hodge suggested Russia was planning to hit civilian ships and blame Ukraine.
- Russia had laid more sea mines in the approaches to Ukrainian ports, he said, as part of a co-ordinated Russian effort to justify attacking civilian ships. The Kremlin did not immediately respond to the allegation.
- Meanwhile in a similar warning to Russia’s, Ukraine has said ships heading towards Russian or occupied ports on the Black Sea could be viewed as carrying military cargo.
- Wheat prices on the European stock exchange soared by 8.2% on Wednesday from the previous day, to €253.75 (£220; $284) per tonne, while corn prices were up 5.4%.US wheat futures jumped 8.5% – their highest daily rise since just after Russia’s February 2022 invasion of Ukraine.
- Prices in shops will not immediately increase when market prices go up. (2)
Ukraine threatens Russian Black Sea ships in tit-for-tat move against Moscow
The tit-for-tat threats likely mean the movement of civilian ships will stop in the northern Black Sea as insurers suspend their coverage due to heightened risks
The TQ Samsun is the last grain ship, carrying corn and rapeseed, to leave Ukraine under the Black Sea grain initiative
Image Source: Politico
Ukraine on Thursday warned that all ships sailing to Russian-controlled Black Sea ports could be targeted by attacks — a response by Kyiv to Moscow’s threat against civilian vessels traveling to Ukrainian seaports. Kyiv’s defense ministry said in a statement that such vessels “may be considered by Ukraine as carrying military cargo with all the corresponding risks” from midnight Friday.
Kyiv’s move comes after Russia bombarded its ports…Russia followed up by launching a barrage of airstrikes at Kyiv’s ports this week. On Wednesday, the Russian defense ministry said that “all ships going across the Black Sea to Ukrainian ports will be considered potential carriers of military-purpose cargoes” — meaning they could be subject to attack.
“The Russian Federation has once again brutally violated the universal right to free navigation for the whole world and is deliberately undermining food security,” Ukraine’s defense ministry said, adding that “the Kremlin has turned the Black Sea into a danger zone.”
Russia owns several Black Sea ports including major oil exporting harbor Novorossiysk. Moscow also currently controls Ukrainian ports such as Mariupol.
The Kremlin is trying to scare civilian ships from calling at Ukrainian ports, and Kyiv’s response aims to do the same to vessels sailing to Russian ports.
The tit-for-tat threats likely mean the movement of civilian ships will stop in the northern Black Sea as insurers suspend their coverage due to heightened risks, said a diplomat from one EU country home to a major maritime industry, speaking after being granted anonymity. “It’s quite worrying,” they said.
“…the resumption of the U.N. deal was “crucial in addressing risks to global food security.”
But John Stawpert, senior manager for environment and trade at the International Chamber of Shipping, said it’s difficult to predict the impact on shipping in the area amid the “saber-rattling.”
“It’s very much a case of wait and see at the moment,” he said.
Marine traffic suggests that Ukrainian controlled waters are largely empty of shipping while vessels are sailing to ports controlled by Moscow.
Whether ships continue to sail through the area would depend on “thorough risk assessments” and whether insurers would cover them, Stawpert said.
“If the risks can be insured, then I think it’s likely that they would do it,” he added. “It’s a question of what the level of threat is now in those waters.”
Lloyd’s of London, one of the world’s largest shipping insurance markets, declined to comment on Ukraine’s move but told POLITICO the resumption of the U.N. deal was “crucial in addressing risks to global food security” while adding it was “committed to continuing to support diplomatic efforts to reinstate the safe corridor.”
Moscow has said it would return to the deal under strict conditions, including if Western countries readmit its state agricultural bank to the SWIFT international payment system and lift restrictions on insurance for its vessels. (3)
What Next?
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A Russian MP has claimed that Putin could order Wagner fighters to attack the land bridge between Belarus and Russian-held Kaliningrad. The land bridge – called Suwalki corridor – is part of NATO territory and could trigger article 5 of collective defence. Will Putin risk NATO’s wrath and attack this corridor? Why is it called the alliance’s underbelly? (4)
The Global Food Security Crisis: Russia Pulls Out of the Black Sea Grain Initiative (But Continues to Smuggle Grain)
The Ukrainian National Cybersecurity Coordination Center on the “First World Cyber War”
