The end of the grain deal was initially taken in stride by the market last Monday. In the following days, the situation in the Black Sea escalated further, triggering a price spike on Wednesday. Russia attacked Ukrainian port cities and damaged port facilities. The Russian defence ministry said on Friday that its Black Sea fleet had practised firing missiles at “floating targets” and seizing ships. But Moscow’s ambassador to Washington denied any plans to attack ships.
With Russia and Ukraine viewing cargo ships as potential military targets, fewer ships are calling at Russian ports. China calls for a swift return to the grain agreement.
Over the weekend, profit taking caused prices to fall. Nevertheless, rapeseed and wheat ended the week with significant gains. The fact that the rally quickly ran out of steam was mainly due to the behaviour of importing countries, which, unlike at the start of the war, refrained from panic buying and waited to see how the situation would develop. With the recent harvest, most countries in North Africa and the Middle East have sufficient domestic supplies to feed their populations for the time being.
The second reason for the slowdown was a more favourable weather outlook in the US. It is now not expected to be as dry as feared a few days ago, improving the outlook for corn and soybean yields and putting pressure on the Chicago market.
In the coming days, however, the rally is likely to continue rather than fall as it becomes clear that the escalation in the Black Sea is having a direct impact on market activity.
Looking for ways back to grain deal
International politicians continue to search for ways back to the grain deal. Russia’s key ally, China, has called on the United Nations Security Council to restore supplies to Ukraine as soon as possible. China is the largest beneficiary of the grain agreement. 25% of all goods exported through the grain corridor went to China, totalling around 8 million tonnes.