Wheat futures jumped, hitting a record high in Sydney, after Russia withdrew from the UN-brokered Black Sea grain export deal, provoking concerns of a fresh halt to shipments from Ukraine.

In the US, Chicago soft red winter wheat futures for December leaped 7.7% at one point, to $8.93 ¼ a bushel, before easing back to $8.55 ¾ a bushel in late deals, a gain of 6.8% on the day.

Hard red winter wheat futures for December stood 6.1% higher at $9.80 ¾ a bushel, with Minneapolis spring wheat for December adding 4.0% to $9.83 a bushel.

Corn – of which, like wheat, Ukraine is a major exporter – gained 1.8% to $6.92 ¾ a bushel in Chicago.

Paris soft milling wheat for December settled up 4.4% at E252.25 a tonne, while London feed wheat for November finished 3.9% up at E274.70 a tonne.

In Australia, another major grain exporter, Sydney east coast wheat futures for January closed up 4.1% at Aus$503 per tonne, a record-high finish for a spot contract.

‘Significant increase in prices’

The gains followed Russia’s suspension on Saturday, for an “indefinite term”, of its participation in the deal, agreed in July, to allow a safe corridor for grain exports from three Ukrainian ports.

Moscow blamed the decision on what it termed a major Ukrainian drone strike on its fleet in Crimea, saying it could not now “guarantee safety of civilian ships” sailing under the deal.

The announcement “will generate a significant volatility on the markets” and “will lead to a significant increase in prices at the beginning of the week”, said Agritel.

At Commonwealth Bank of Australia, Tobin Gorey said that “our view has been that wheat futures were adding little premium to prices for the risk that the corridor would close”, implying marked scope for gains from Russia’s move.

‘Movement of ships is unacceptable’

Ships loaded with grain were continuing to leave Ukrainian ports on Monday, Ukrainian Infrastructure Minster Oleksandr Kubrakov said, after the resumption of inspections, by 10 teams provided by the UN and Turkey.

Indeed, the 355,000 tonnes of grain that left Ukrainian ports on Monday, in 12 vessels, was the most since the deal came into force, fostering some mid-session weakness in prices.

However, this price retreat proved short-lived, amid concerns that Russia’s move may prompt insurers to step back over covering vessels heading for Ukrainian ports, while Russia termed  the continued sailings “unacceptable”.

“The movement of ships along the security corridor is unacceptable, since the Ukrainian leadership and the command of the Armed Forces of Ukraine use it to conduct military operations against the Russian Federation,” Russia’s defence ministry said.

ADM optimism

Russia’s move comes towards the end of the Black Sea grain export deal, which expires in three weeks’ time, although talks had begun on extending the agreement.

Archer Daniels Midland last week voiced hope of the deal being renewed, with Juan Ricardo Luciano, the agricultural trading giant’s chief executive, saying that “everything we hear at this point in time” is that the agreement will roll over.

“There may be an objection here or there, but nothing significant that could derail this,” he said.

“So we are still counting that the corridor will continue to function.”

‘Extension unlikely’

However, Rabobank cautioned last week of a “high” chance of the deal not being renewed.

“For the Russian side, the extension depends directly on the easing of restrictions on Russian exports – which makes an extension unlikely,” the bank said.


Other coverage:

ANALYSIS – Russia’s exit from Ukraine grain export deal a double blow to war against hunger

Black Sea export deal crisis wrong-foots hedge funds, which had hiked bearish bets