Russia Agrees to Extend Ukraine Grain Export Accord

July wheat traded down 4.75% and corn traded down 4.5% intraday on the Chicago Board of Trade (CBOT) Wednesday after Russia said it would extend its participation in the Black Sea Grain Initiative, reminding farmers, traders, and procurement managers of just how volatile the situation in the war-torn region has become.

The Black Sea Grain Initiative, which has been extended for an additional two months, has been critically important in restoring Ukrainian grain flows to the world by creating a safe transit corridor from the war-torn country, as Gro highlighted here. 

Plenty of uncertainty around global wheat production and trade remains, especially in the Black Sea, since 2023/24 grain crops are far from settled. Because of lower planted area, wheat production in both Russia and Ukraine is forecast to be lower despite higher predicted yields, as shown by Gro's Black Sea Wheat Yield Models.

USDA has 2023/24 Ukraine wheat production at 16.5 million tonnes with exports at 10 million tonnes, down from 21% and 33%, respectively, from the previous year. Ukraine’s corn production is estimated at 22 million tonnes in 2023/24, down 19% year over year, and corn exports at 16.5 million tonnes, down 35%. 

Global wheat ending stocks, outside of China, are at their lowest level since 2008/09. Meanwhile, 2023/24 wheat production in many countries is at risk from drought — the Gro Drought Index, aggregated for all the world’s wheat-growing regions using Gro’s Climate Risk Navigator for Agriculture, is at its highest level in at least two decades. While Canada’s wheat production is expected to increase, early indications are for weaker harvests in Russia, India, Ukraine, and Australia. Argentina’s wheat production bears close monitoring amid lingering drought. The country is currently planting its wheat crop. 

Russia had threatened to quit the Black Sea Grain Initiative multiple times, causing price gyrations. Exacerbating the erratic trades is the speculative position held by managed funds in Chicago wheat; managed money as of May 9 was net short nearly 117,000 contracts.

The U.N. and Turkey brokered the Black Sea export agreement in July last year to help tackle a global food crisis that has been aggravated by Moscow's invasion of Ukraine, one of the world's leading grain exporters. Since then, Moscow agreed to extend the export agreement in November for an additional 120 days, and in March for a further 60-day period.