Wheat price climbs almost 6% as Black Sea deal fails

[MongiIG]

With Russia pulling out of the so-called Black Sea deal, to allow the export of Ukrainian wheat, traders sense an opportunity to buy the commodity. This has also had a knock-on effect for corn.

 Jeremy Naylor | Writer, London | Publication date: Monday 31 October 2022

Black Sea deal

Moscow has suspended its involvement in the so-called Black Sea deal, which is an agreement to allow the exports of wheat from Ukraine to the rest of the world. It's in response to what Russia called a major Ukrainian drone attack on its fleet in Russia-annexed Crimea.

Wheat price

Let's take a look at what's happened for the price of wheat, because this is up on the trading day today. You can see quite clearly that there is this big gap that we've seen here currently with the rise of 5.92%.

Now, this deal sort of fell apart, if you like, at the weekend. And we saw some evidence over the weekend that there was going to be this upward move, not just in wheat, but also in other areas of the market as well, because when you don't get wheat, you go to substitute.

One of the substitutes is corn which is not precisely a good substitute, but it is something else, another foodstuff. And you can see here, clearly this now has risen by a gap as well with the rise of two and three quarter percent. So there is upward movement in food staples as a result of this.

There's no end in sight immediately. So potentially there could be some more upside to go. But we'll have to see how things develop of the number of ships that have been barred from exit. There have been two that have got through, but there is something like around about almost 20 ships, I believe.

My understanding is that there are still to come through at some point, but at the moment at least, it's been barred from doing so because of the agreement that's just fallen apart.