Wheat futures surge as Russia backs out of grain export deal

Grain markets have reacted quickly to news of Russia suspending involvement in the Black Sea grain export deal.

London’s May 2023 feed wheat futures peaked at £293/t shortly after markets opened on Monday 31 October, before settling back to £288.05/t at midday.

This means prices are currently up by £6.05/t on week earlier levels.

See also: Grain price rollercoaster rolls on amid global uncertainty

The UN-brokered deal between Russia and Ukraine was signed on 22 July to create a safe export corridor for grain.

The pact was signed at a meeting in Istanbul between Oleksandr Kubrakov, Ukraine’s minister of infrastructure, Russia’s defence minister Sergei Shoigu, and UN secretary-general Antonio Guterres.

More than 9.3m tonnes of food commodities including wheat, barley, maize, and sunflower oil were exported from Ukraine between 1 August and 29 October, according to UN data.

Market reaction

Zoe Andrew, grain trader at Frontier, said: “Futures have traded higher this morning and Chicago traded 6% higher on the overnight session.”

But while the market saw a spike during the morning, it was also waiting to see what happens next.

“The suspension from Russia is with immediate effect, so it does impact vessels that were already in the pipeline,” she said.

One of the unknowns at the moment is whether Russia will engage in negotiations to renew the deal or not.

Some vessels are due to be released from Istanbul this morning, but it’s unlikely they will get new vessels into Ukrainian ports without Russian approval, she added.

Global response

Despite the suspension of the deal, 12 ships carrying a total of 354,500t of grain left Ukraine on Monday 31 October, according to Reuters.

Turkish president Tayyip Erdogan, who was also involved in brokering the agreement, said Turkey will continue to be involved with Black Sea grain exports.

Mr Erdogan said: “Our effort to deliver this wheat to countries facing the threat of starvation is evident. With the joint mechanism that we established in Istanbul, we contributed to the relief of a global food crisis.”

Alternative land routes through mainland Europe are also being considered for Ukrainian grain exports, according to French agriculture and food minister Marc Fesneau.