The grain market is adrift due to the unilateral cancellation of the grain deal by Russia last Saturday. Supply on the world market was already tight and Russian action has thrown the fragile balance off balance. This is especially noticeable in the wheat market.
The December contract for wheat on the Matif stands at €348,50 per tonne at the time of writing. That is an increase of 3,3%, or €11, compared to Friday's closing price. On the CBoT, the December wheat contract is up 5% with a current rate of $8.71,50 per bushel (approximately €323 per tonne). Corn is up approximately 1,5%, while the price increase for soy compared to the weekend price remains below 0,5%.
Almost all analysts agree on the reason for the sudden price increase: Russia's blowing up of the grain deal. The big question is: what next? "Civilian cargo ships should never be a military target or held hostage. Food transport must continue," tweeted Amir Abdullah, who coordinates the grain deal from the UN. The UN announced that there is an emergency plan to guarantee passage for twelve ships that have left Ukraine and four ships on their way to Ukraine. In total, 350.000 tons of grain are on their way from Ukraine.
Blackmail
The US accuses Russia of using food as a weapon in the war. Ukrainian President Zelensky accuses the Kremlin of 'blackmailing the world with hunger'. Russia rejects the accusations and says that due to the damage the Black Sea Fleet suffered from the drone attack, security in the area can no longer be guaranteed. The French Minister of Agriculture announced today that work is being done to further expand the supply by land, for example by rail via the Ukrainian border with Romania and/or Poland. A spokesperson for the German Ministry of Transport says that Berlin's preference is to keep the Black Sea ports open. "Ultimately, the route from Ukraine to the North Sea ports is the longest and therefore also the most expensive and difficult. The short routes are preferred," Reuters noted during a press conference.
No new insurance
Shipping insurer Ascot does not want to insure new ships for sailing to Ukraine for the time being. “As of today, we are pausing quotation writing for the insurance of new cargoes until we have a better understanding of what the latest developments mean,” Chris McGill, head of cargo insurance at Ascot, told Reuters. "Insurance policies that have already been issued will remain in place." The quotations that have been issued also remain valid for the normal period of seven days, although McGill reports that fewer quotations were requested last week.
Ascot and broker Marsh have had a special arrangement since the end of July that allows up to $50 million worth of freight to be insured. The special arrangement by which the insurance risk is shared by various parties in Lloyd's insurance market has been used by a significant number of vessels to date.