Russia Terminates Crucial Grain Deal, Wheat Futures Up 4%

Russia has formally announced its withdrawal from a significant grain deal that permitted Ukraine to export grain through the Black Sea, notifying the UN, Turkey, and Ukraine. The Kremlin’s spokesperson, Dmitry Peskov, stated that the agreement had effectively come to an end on Monday.

World wheat prices began to rise sharply after Russia announced that the grain deal had stopped. Wheat futures for September delivery rose 4.24% to $6.89 per bushel (about 30 kg), according to trading data on the Chicago Mercantile Exchange as of 12:06 Moscow time on Monday.

Under the deal, cargo ships were allowed to navigate the Black Sea from the ports of Odesa, Chornomorsk, and Yuzhny/Pivdennyi. However, Russia emphasized that it would consider rejoining the agreement if certain conditions were met. Russian President Vladimir Putin had long expressed dissatisfaction with the agreement, claiming that it had not been fully honored, particularly regarding the export of grain to poorer nations, which was a stipulation of the deal. Additionally, Russia cited Western sanctions as a hindrance to its own agricultural exports, repeatedly threatening to withdraw from the agreement. Nonetheless, Turkish President Recep Tayyip Erdogan expressed belief that Putin intends to continue the deal, announcing plans to discuss its renewal during their upcoming meeting.

The termination of the grain deal carries significant implications as Ukraine is among the largest global exporters of sunflower, maize, wheat, and barley. The blockade of Ukrainian ports following Russia’s invasion in February 2022 led to the entrapment of 20 million tonnes of grain and a sharp surge in global food prices. Moreover, the disruption threatened food supplies for numerous Middle Eastern and African countries that heavily rely on Ukrainian grain.

Nikolay Gorbachev, the president of the Ukrainian Grain Association, acknowledged that alternative means of exporting grain, such as through Danube River ports, have been identified. However, he acknowledged that these alternative ports would be less efficient, resulting in reduced grain exports and increased transportation costs. Western leaders swiftly condemned Russia’s decision, with EU Commission President Ursula von der Leyen accusing Russia of a “cynical move” and emphasizing Brussels’ commitment to ensuring food security for vulnerable populations worldwide. Notably, the Kremlin’s announcement coincided with Ukraine claiming responsibility for an attack on a bridge in Crimea, resulting in two civilian deaths. Mr. Peskov clarified that Russia’s decision to let the deal expire was unrelated to the attack and had been declared by President Putin prior to the incident.