Wheat futures surge 7.5% as Russia's missile barrage drives Black Sea supply fears

10 Oct 2022 | Mark Shenk

Wheat futures surged over 7% on Monday as traders responded to Russia's barrage of missile attacks on cities across Ukraine earlier today that appeared to heighten still further the risks to a UN-brokered accord between the nations on an export corridor for Black Sea grains.

Ahead of Russia's attacks on cities including Kyiv, Dnipro and Lviv, traders had already expected the Black sea exports to come under increasing threat following a massive explosion and damage to a Russian-built bridge on Saturday that connects Russia with Ukrainian territory it occupies in Crimea. 

"I think it goes back to the fact nearly 30% of the world’s wheat exports could be in some sort of jeopardy if the Black Sea Export Corridor agreement is not extended,"  Larry Shonkwiler of Advance Trading told Agricensus.

As of 1151 Eastern time, Chicago SRW December futures were up 7.6% on Friday's settlement at $9.47/bu, while March was up 7.2% at $9.59/bu.

Kansas City HRW futures climbed about 6.5% on last Friday’s settlement, with December at $10.35/bu and March at $10.30/bu.

"Indeed the Black Sea issues are foremost, as is the fact that spec trade still short Chicago wheat, either outright or versus corn, soy, Matif, etc...," Jeffrey McPike of McWheat Inc. told Agricensus. 

Although Russia has said its attacks that hit some Ukrainian city centres in morning rush hour traffic were in response to the bridge explosion, Ukrainian authorities said the missile barrage had been ordered before the massive blast at the Kerch Bridge, responsibility for which is neither confirmed nor denied by the government in Kyiv. 

The bridge, so-named because it spans the Kerch Strait - the narrow neck of water that connects the Azov Sea with the deeper Black Sea - was extensively damaged after an explosion sent part of the road section into the water and caused a fire on a passing train.

"Corn and wheat are all related to the war's escalation. Traders are starting to wonder if Russia will not renew the safe passage agreement.  Otherwise, today could have been as a down day as the US dollar is higher and West Texas Intermediate crude lower," senior grain and oilseed commodity analyst at Futures International Terry Reilly told Agricensus.

The grain corridor agreement restored export flows from Ukraine, and renewed  access for Russian grains and fertilisers after Russia’s invasion and the blockade of all maritime activity across the Black Sea and Azov Sea, which prompted western sanctions. 

Besides the UN, Turkey also brokered the agreement.

Due to run through to November 20, the agreement has been an increasing source of ire for Russian authorities in part because Ukraine’s exports have surged while Russian exports lag behind the seasonal pace.

In Europe, the front-month December Euronext milling wheat futures contract traded at €364.5/mt, up €16.5/mt, while December dropped by €16.25/mt to €363/mt.