Maybe the Ukraine export rollover deal wasn’t so momentous after all.
At least, so markets are suggesting.
While wheat futures prices initially tumbled, as might be expected after Russia and Ukraine agreed an extra 120-day lifeline to the safe corridor for shipments, bears’ stranglehold soon weakened.
Chicago December soft red winter wheat futures, having initially slumped by 2.9% to a two-month low, recovered to stand just 1.1% lower in closing deals.
Paris December wheat futures rebounded from 1.6% losses to close up 1.5%, its best performance in two weeks.
Of course, this may be down just to profit-taking by investors on short positions taken out in expectation of a deal – so-called “sell the rumour, buy the fact” thinking.
But there are other explanations in the frame too.
One is that the terms of the agreement fell short of expectations. The deal was, after all, extended for 120 days, rather than the one year that Ukraine had been seeking, and has thus far fallen short in geography too.
Russia has not agreed that the deal should be extended beyond the three ports already covered to existing facilities, as Ukraine had wanted, including southern Mykolaiv sites which accounted for 35% of Ukraine’s foods exports ahead of the Russian invasion.
Importers certainly don’t seem to have been hanging around awaiting lower prices.
The recovery in Paris prices was viewed as fuelled by talk that China had bought additional French wheat, on top of two cargos reportedly purchased earlier this week.
And after all, Egypt’s Gasc, which is famously price sensitive, has been buying at $362 per tonne including freight (after last week rejecting prices pitched in the main higher by $10 per tonne or more).
The fall in Paris futures on Thursday took the December lot at one point as low as E314.75 per tonne, equivalent to $326 per tonne.
Even factoring in extra costs, such as the $23 per tonne for shipping from France to Egypt, that kind of price must have got buyers such as Gasc thinking.
Especially as shipping in from the European Union comes with a lot less extra baggage these days than buying from outcast Russia.