Wheat prices soar as both Ukraine and Russia threaten ships

SYDNEY – Wheat prices continued rising on Thursday – following the biggest daily surge in more than a decade on Wednesday – as threats surrounding grains trade in the Black Sea escalated, with both Ukraine and Russia warning that ships headed to each other’s ports could be considered military targets.

Ukraine issued a tit-for-tat response to an earlier warning from Moscow, after US intelligence alerted that Russia had laid explosives at Ukrainian ports.

Chicago wheat futures, a global benchmark for wheat prices, rose 1.3 per cent after climbing almost 9 per cent at one point in the previous session, the biggest increase since 2012. Russia’s Ministry of Defence warned that all vessels in the Black Sea heading to Ukrainian ports would be considered potential carriers of military cargo starting from Thursday.

The warning came just days after

Russia ended the Black Sea grain deal

that kept Ukrainian exports flowing through the corridor. Ukraine’s Black Sea ports are a vital artery for its sales abroad – historically accounting for the bulk of shipments – and the harvest season is now under way. The corridor’s closure could slow the next crop getting to market.

Reduced availability of grain from Ukraine means less export availability during the crucial Black Sea harvest period, said Mr Dennis Voznesenski, a senior agriculture analyst at Rabobank Group in Sydney.

“In the long term, it means more grain stockpiled in Ukraine, which leads to lower Ukrainian prices, lower Ukrainian farm margins and lower planting,” he said.

Russia’s declaration appeared to signal that Moscow would consider commercial ships to be legitimate military targets and the countries where the ships are registered to be aiding Ukraine. While the statement did not say explicitly how Russia’s navy would respond to a ship bound for Ukraine, the statement will almost certainly deter commercial shipping.

In Moscow, President Vladimir Putin said Russia would consider rejoining the grain deal if its demands on its own exports of grain and fertiliser were met. He said the current agreement had “lost all meaning”.

Ukraine’s exports are an important factor in the stability of global grain prices, supplying key Russian trading partners like China and also sending grain to some nations in the Middle East and Africa that face hunger. United Nations Secretary-General Antonio Guterres said on Monday that he was “deeply disappointed” by Russia’s decision to back out of the grain deal.

After Monday’s announcement, Ukrainian President Volodymyr Zelensky said he hoped it would be possible to continue exporting grain via the Black Sea despite Russia’s position, under a separate agreement Ukraine signed with Turkey and the UN, both of which had brokered the original agreement. While such a plan would have many obstacles to overcome, the statement by the Russian Ministry of Defence would appear to have put it to a definitive end.

Wheat prices had already risen 5 per cent over the course of Monday and Tuesday, following Russia’s announcement. Still, prices remain below levels reached when the war first began and are even below levels reached at the start of 2023. BLOOMBERG, NYTIMES