Wheat traders shrug off Black Sea flash points as exports flow
Wheat markets shrugged off a further escalation of tensions in the Black Sea, after Russia said it fired on a cargo vessel over the weekend to stop the ship for checks.
Benchmark futures declined as much as 3.4 per cent, before paring losses in Chicago overnight. Benchmark futures traded near $US6.40 a bushel on Tuesday after sliding 1.9 per cent the previous day.
Ukraine said the vessel that was stopped – the Sukru Okan – was Turkish. A person familiar with the matter said the ship was empty and had unloaded a corn cargo the previous day in Greece. It was heading to the Ukrainian port of Izmail to load more grain and is currently docked in Romania, they said.
Traders are closely monitoring the region for any sign of a change in exports from two of the world’s largest grain suppliers.
The incident marks the first time Russia has targeted a grain ship since last month’s collapse of a deal allowing safe passage for Ukrainian exports. The Black Sea has recently become more risky, underscored by Russian threats to ships sailing to Ukraine, and Ukraine’s strike on an oil tanker near Russia.
Russia’s warning shots at a cargo ship approaching Ukrainian waters on Sunday increased risks for civilian ships moving grain, StoneX chief commodities economist Arlan Suderman wrote in a note.
Ukraine has also said that it too would consider any ships moving toward Russian ports as potentially military targets. “That is raising concerns that Ukraine might strike at Russia’s ability to export commodities.”
The Sukru Okan, a dry-freight carrier, was bound for Izmail when a Russian naval patrol ship opened fire after the cargo vessel’s operators didn’t respond to a request for inspection, Russia’s Defence Ministry said. It was then allowed to resume its trip, according to the ministry.
Russia warned last month that ships headed to Ukrainian ports would be considered as potentially carrying military cargo, heightening overall risks in the region.
“These actions exemplified Russia’s deliberate policy of endangering the freedom of navigation and safety of commercial shipping in the Black Sea,” Ukraine’s Foreign Ministry said Monday in a statement.
Ukraine’s seaports have been blocked since Russia quit the export deal. That has made its Danube River ports, such as Izmail, increasingly important to send its crops abroad.
Katerina Kononenko, an operations manager at Avalon Shipping in Romania – which works with vessels in the Sulina channel and on the Danube – said traffic was normal.
Wheat futures remain around 22 per cent lower this year amid bumper harvests.
On Friday, the US Department of Agriculture raised its estimate for Russian wheat exports to 48 million metric tons for the 2023-24 season. That means almost a quarter of the world’s wheat trade will now come from Russia.
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