Russia announced this weekend that it is pulling out of the Black Sea Grains Initiative, casting doubt on Ukraine’s ability to export grain and oilseeds and heightening concerns about food security in many import-reliant countries.
Wheat futures prices surged as much as 7% in intraday trading on Monday before giving up some gains, while corn futures rose as much as 3%. The market ultimately closed with wheat up 5.9% and corn up 1.2%.
Russia and Ukraine are critically important suppliers of wheat and other agricultural commodities to world markets. The Black Sea Grain Initiative — an agreement signed in July among the two warring countries as well as Turkey and the UN — allows Ukraine to ship agricultural products from Black Sea ports safely.
Russia’s move comes at a time when the world’s supplies of many agricultural commodities are at multi-year lows. For example, global wheat inventories for major exporters of the grain are at their tightest levels in 14 years, as shown in this Gro display.
Filling the gap in wheat supplies will be difficult, as drought conditions weigh on new crops in the US and Argentina, both major wheat exporters, as Gro wrote about here. In Ukraine, wheat exports in recent months have been from last year’s crop, and great uncertainty lingers over the new winter wheat crop amid the ongoing war.
Australia is the only Southern Hemisphere producer that has a chance at adding to world wheat supplies in coming months, but heavy rains and flooding in eastern Australia are apt to trim expectations and could impact grain quality.
This display in Gro’s Climate Risk Navigator for Agriculture, weighted for wheat growing regions in Australia, shows that aggregated precipitation this year is the highest in more than 20 years.
Grain cargoes were still sailing out of Ukraine as of Monday morning, as both Turkey and the UN are attempting to keep Ukraine export shipments going. A reported 40 vessels were inspected Monday.
But wheat shipments moving forward are uncertain. North Africa, South Asia, and the Middle East are the largest importers of Ukraine wheat, as shown in this Gro display. In addition, severe drought in North Africa and the Middle East have damaged domestic crop production in those regions and increased import needs, as Gro wrote about here.