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Russia announces indefinite moratorium

After the Russian side announced over the weekend that it would indefinitely suspend its participation in the implementation of the initiative to ship agricultural products from the Black Sea ports, the global agricultural market rose sharply on Monday, unsurprisingly.

Among them, the most actively traded wheat futures contract on the Chicago Board of Trade (CBOT) opened more than 7% higher on the day, hitting a high of $8.93 a bushel, the highest in two weeks. Since then, although the price of wheat has fallen back from the opening, the current increase is still as high as about 5.4%, and the latest trade is around $8.75 per bushel.

Meanwhile, corn on the CBOT was last up 2.3% on the day at around $6.96 a bushel and soybeans rose 0.7% to $13.97 a bushel.

For the sharp rise in grain prices in the past few days, industry insiders obviously expected it for a long time.

Charlie Sernatinger, head of global grain futures at ED&F Man Capital Markets in Chicago, said over the weekend, “We’re pretty sure (the market) will open higher. With the safe passage agreement set to expire in mid-November, if an extension cannot be reached, then the The magnitude of price increases will be difficult to predict.”

David Laborde of the International Food Policy Research Institute in Washington also said that food prices could rise by 5% to 10% in the next few days as the market digests the bad news.

Andrey Sizov, a Russian grain analyst at consultancy SovEcon, noted that the grain market could be particularly volatile, as he said many funds would have to come in on Monday to cover their positions.

Russia will suspend its participation in the implementation of an agreement on the export of grain from the Black Sea from Ukrainian ports due to the terrorist attack in the waters of Sevastopol, the Russian Defense Ministry said on Saturday.

The Ukrainian side carried out a terrorist attack on Black Sea Fleet ships and civilian vessels at barge points in and around Sevastopol on Saturday morning, while “experts” from the British navy helped plan the drone strike, Russia’s Defense Ministry said. .

Russia said in a letter to UN Secretary-General Antonio Guterres on the same day that it would suspend the agreement “indefinitely” because it could not “guarantee” the safety of civilian ships sailing under the agreement. .

On July 22 this year, Russia and Ukraine signed agreements with the United Nations and Turkey on the resumption of the export of agricultural products from Black Sea ports. The agreement includes the establishment of a joint coordination center in Istanbul, Turkey and ensuring the security of food shipments. Thanks to the establishment of this “Black Sea Corridor”, the export of Ukrainian agricultural products once recovered to a level close to that before the Russian-Ukrainian conflict in September.

16 ships will still try to pass through ‘Black Sea Corridor’ on Monday

As part of the Black Sea Food Initiative, Ukraine, Turkey and the United Nations have reached an agreement on plans for the passage of 16 ships in the Black Sea on October 31, according to a statement issued over the weekend by the Istanbul-based Joint Coordination Center for Food Exports from the Black Sea. Twelve of them departed from Ukrainian ports, and four sailed to Black Sea ports from outside. The UN mission has conveyed this information to the Russian delegation.

According to the relevant regulations of the Joint Coordination Center, all participants should communicate and coordinate with their respective militaries and other relevant authorities to ensure the safe passage of merchant ships under the initiative for the export of agricultural products from the Black Sea Ports.

However, the safety of these 16 ships cannot be guaranteed by Russia. Russia said it had suspended its participation in the Black Sea Initiative and could not guarantee the safety of civilian ships sailing under the initiative.

The Joint Coordination Centre held a plenary meeting earlier in the day. During the meeting, the Russian delegation stated that Russia will indefinitely suspend its participation in the implementation of the initiative for the export of agricultural products from the Black Sea ports, but will continue to communicate with the United Nations and the Turkish delegations on some pressing issues, and on issues that require immediate decisions by the Joint Coordinating Committee Russia is also willing to cooperate remotely.

Russia: ready to replace Ukrainian grain on the world market

On the same day as announcing the suspension of the Black Sea grain export agreement, Russian Agriculture Minister Dmitry Patrushev said in an interview with Russia’s 24 TV that Ukraine’s grain export did not solve the problem of poor countries, and Russia was ready to send it free of charge. The poorest countries provide 500,000 tons of food.

And now, Russia does seem to have plans to replace Ukrainian grain in the world market. Russian Federation Council Deputy Chairman Konstantin Kosachev said over the weekend that Russia has a good harvest and is ready to replace Ukraine in the world grain market.

Kosachev posted on Telegram: “At least 50 countries rely heavily on our food, including the poorest African countries. Given the huge domestic harvest, Russia is ready to completely replace Ukrainian grain in the world market. It is estimated that my country’s export potential this season is more than 50 million tons.”

He pointed out that in addition to the Istanbul agreement, about 10.5 million tons of my country’s grain has been shipped to Asian and African countries. Kosachev also emphasized, “We could have provided much more food and fertilizer, even partially free. But the arrogance of the West, that is, sanctions against Russia, is indeed playing a negative role.”

Mikhail Sheremet, a member of the Russian State Duma from Crimea, also pointed out on Sunday that Ukraine, the United States and the United Kingdom are behind the sabotage of the food trade. The attack on the Black Sea Fleet ships in the Gulf of Sevastopol, which provides security for the Black Sea grain route, was a planned provocation. According to him, most of Ukraine’s food exports are to meet the needs of EU countries.

“The United States and the United Kingdom will benefit from breaking the deal, which will further plunge EU countries into crisis. They first organized the destruction of the Nord Stream gas pipeline to cause an energy crisis. Now, it’s a food crisis,” Sheremet said.

Risk of global food crisis increases sharply again

Ukraine’s Black Sea port is one of the world’s most important export routes for wheat, corn and other crop commodities. Before the outbreak of the Russian-Ukrainian crisis, more than 95% of the agricultural products in this “European granary” were exported through Black Sea ports. After the conflict broke out, that number dropped to zero. This was followed by a 46% surge in wheat prices and an 11% rise in corn prices.

A total of 3.8 million tons of Ukrainian agricultural products left ports in the country’s Odessa region via the Black Sea last month, thanks to the establishment of the “Black Sea Grain Transport Corridor”. This figure is more than the sum of Ukrainian grain exports in all other directions. According to Ukrainian government data, 1.24 million tons of agricultural products were exported through Ukrainian Danube ports in the month, and 1.82 million tons were exported by land and rail.

Therefore, for the global agricultural product market, Russia’s decision to suspend the Black Sea grain export agreement will undoubtedly trigger a new “earthquake” in the agricultural product market.

Analysts expect the market’s next reaction to corn will likely be particularly strong, given that this season’s corn harvest in Europe is at a 15-year low.

“The shortages of fuel, fertilizers and food will be felt most acutely in Europe and surrounding regions in the Middle East and Africa over the next four months of winter,” said Michël Tanchum, a researcher in the Economics and Energy Program at the Middle East Institute in Washington.

Another major risk is that Ukrainian farmers may refuse to replant crops that are “unsellable,” said Michael Magdovitz, a senior analyst at Rabobank in London.

“In the short term, I think key products will go offline and global prices will remain high,” Magdovitz said.

In any case, after the Black Sea Corridor is no longer “unblocked”, the current upward pressure on food prices may not be as crazy as in March, but the alarm bell of global food security has been sounded again. The World Food Programme said earlier this year that as many as 50 million people worldwide are now teetering on the brink of famine.

The pain is worst for people in poorer countries, where food makes up a larger portion of the average household bill. Several countries in East Africa have recently experienced severe food shortages. Although food prices have fallen recently, they are still around 45% higher than before the spread of the coronavirus in early 2020, according to the United Nations Food Price Index.

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