Wheat prices surge as Putin assails Ukraine grain deal

Russia is struggling to export its own bumper wheat harvest. PHOTO: REUTERS

LONDON - Wheat futures climbed as much as 6.9 per cent after Russian President Vladimir Putin criticised a recent grain deal with Ukraine, heightening attention on the sales outlook from the Black Sea region.

The grain shipment corridor from Ukraine is not helping poorer countries, as the majority of supplies are going to Europe, Mr Putin said at the Eastern Economic Forum in Vladivostok.

It may be worth discussing restrictions on the routes with Turkish President Recep Tayyip Erdogan, he added. The export deal, forged in July, was brokered by Turkey and the United Nations. It is valid for an initial 120 days, and markets remain sensitive to any signals from politicians on its future.

Ukraine is one of the world's top crop shippers, and the resumption of flows from its Black Sea ports has helped ease global grain costs, though much hinges on whether the pace holds.

Russia, as well as poorer countries, were deceived, even though "we have done everything to reach these agreements... adhere to them and ensure them", Mr Putin said.

Russia is struggling to export its own bumper wheat harvest. Shipments in July and August fell 22 per cent versus a year earlier despite a bigger crop. Food sales have been exempted from Western sanctions, though some banks and shippers remain wary of doing business there.

"Putin has no interest in seeing Ukraine benefit from large grain sales at a time when sales from his own country are sluggish following a big crop," said Mr Arlan Suderman, chief commodities economist at US-based StoneX.

A senior US State Department official said on Wednesday that the administration's efforts to ensure global food security are beginning to see results, and Ukrainian output has nearly returned to prewar levels.

The official, who briefed reporters on condition of anonymity, said Mr Putin's comments may be an effort to divide the world and rally poorer nations to press for the war to end on Russia's terms.

Ukrainian officials also pushed back against Mr Putin's claims. Foreign Minister Dmytro Kuleba said two-thirds of Ukrainian grain being sent as part of the initiative are going to consumers in Asia, Africa and the Middle East.

"Just now, another vessel with Ukrainian grain has reached the shores of Africa near Sudan," Mr Kuleba said. He said the recovery of Ukrainian food exports has reduced food prices and cut the risk of a food crisis.

More than 2 million tonnes of grain and other foodstuffs have been shipped from Ukrainian ports since early August, according to data posted by the UN. That includes recent cargoes to China, Italy, Somalia, Spain and Turkey.

A spokesman for UN Secretary-General Antonio Guterres last month said the corridor is helping to restrain world food prices, which had soared after the outbreak of the war. 

The first wave of ships to depart were stuck at port for months and later headed to destinations contracted before the invasion. Mr Mykhailo Podolyak, an adviser to Ukrainian President Volodymyr Zelensky, told Reuters on Wednesday that Russia has no grounds to review the Ukraine grain export deal and the terms of the agreement are being observed.

After earlier climbing nearly 7 per cent, Chicago wheat futures for December settled at US$8.4425 a bushel on Wednesday, an increase of 3.3 per cent and the highest closing price since July 11.

In other crops, December corn and November soya bean in Chicago both ended the trading day lower after earlier gains. BLOOMBERG

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