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Wheat prices jump after Russian missile strike tests Ukraine deal

July 25, 2022 Updated Mon., July 25, 2022 at 4:41 p.m.

A combine harvester cuts through a field of wheat during the summer harvest in Heudicourt, France, on Thursday, July 14, 2022. MUST CREDIT: Bloomberg photo by Nathan Laine.  (Nathan Laine)
A combine harvester cuts through a field of wheat during the summer harvest in Heudicourt, France, on Thursday, July 14, 2022. MUST CREDIT: Bloomberg photo by Nathan Laine. (Nathan Laine)
By Megan Durisin </p><p>and James Poole Bloomberg

Wheat jumped after Russia’s weekend attack on the seaport of Odesa, even as Ukraine indicated it’s pushing ahead with a deal to begin shipping millions of tons of grain that has been piling up since the invasion.

The landmark agreement signed Friday aims to facilitate exports from three of Ukraine’s Black Sea ports, including Odesa, and was hailed as a vital step toward alleviating a global food crisis.

Ukrainian officials are still preparing to restart sea exports as soon as this week despite the attack on Odesa, which drew swift international condemnation.

Yet many analysts and Western officials were skeptical even as the agreement was signed last week, and the assault will serve as a stark reminder of the risks for shippers and insurers as Russia’s war rages on.

“The willingness of ship owners to come with their ships to our ports will be the crucial factor to recover export volumes from Ukraine,” Roman Slaston, director general of the Ukrainian Agribusiness Club, said by telephone.

Farmers “have some cautious optimism about this deal, but they also understand that any time it might stop again.”

Chicago wheat futures surged as much as 4.6% and traded 3.1% higher at 12:56 p.m. in London.

Prices had slumped almost 6% Friday and closed at the lowest since early February after the deal was signed in Istanbul. The Paris contract rose 1.4%.

Ukraine said on the weekend that the missiles didn’t hit grain storage at the port.

Russia said Monday its missile strike on Odesa targeted a military area and wouldn’t affect plans to resume grain exports from the Black Sea port.

“The attack on Odesa last Saturday is raising doubts about the resumption of the port activity in appropriate conditions,” analyst Agritel said in a note.

“The market will inevitably remain very nervous in the event of new bombings or doubts about the concrete implementation of this resumption of export activity.”

Ukraine is moving ahead for now with preparations – the government is under huge pressure to restart grain exports to support its economy, which has been devastated by the war.

The infrastructure ministry said Kyiv is beginning to prepare the Odesa, Chornomorsk and Pivdennyi ports to resume work and published a call for ships willing to take part in grain export caravans.

Ukraine’s staff-level officials have already arrived in the Istanbul to coordinate exports at a new coordination centre, set up to help exports as part of Friday’s agreement, news service Interfax reported, citing the Infrastructure Ministry.

Once exports resume, traders will be watching for signs of how quickly volumes can pick up.

The country normally ranks among the world’s top corn, wheat and vegetable-oil shippers, and millions of tons of grain have been stuck in its borders since Russia’s invasion early this year blocked major ports.

While a small volume has been rerouted by road, river and rail, major customers have been forced to look elsewhere for supplies, pushing up prices and worsening food insecurity.

U.N. Secretary General António Guterres said resuming seaborne trade would bridge those gaps and urged the deal to be “fully implemented.”

The parties to the agreement committed not to undertake attacks against merchant vessels or port infrastructure engaged in the initiative, according to a copy of the document signed by Ukraine posted on Facebook by Andriy Sybiha, deputy chief of staff to Ukrainian President Volodymyr Zelensky.

In Chicago, corn also headed for its first advance in a week and soybeans rose.

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