Wheat markets shrug off Black Sea flashpoints as exports flow: Report

By Áine Quinn, Beril Akman and Tarso Veloso

Wheat markets shrugged off a further escalation of tensions in the Black Sea, after Russia said it fired on a cargo vessel over the weekend to stop the ship for checks. 
 

Benchmark futures declined as much as 3%, before paring losses in Chicago. 

Ukraine said the vessel stopped — the Sukru Okan — was Turkish. A person familiar with the matter said the ship was empty and had unloaded a corn cargo the previous day in Greece. It was heading to the Ukrainian port of Izmail to load more grain and is currently docked in Romania, they said. 

Traders are closely monitoring the region for any sign of a change in exports from two of the world’s largest grain suppliers. The incident marks the first time that Russia has targeted a grain ship since last month’s collapse of a deal allowing safe passage for Ukrainian exports. The Black Sea has recently become more risky, underscored by Russian threats to ships sailing to Ukraine, and Ukraine’s strike on an oil tanker near Russia. 

“Despite all the attacks seen in the last fortnight, grains continue to flow from both sides,” Rabobank analyst Carlos Mera said. Spot prices have been depressed by strong availability due to large Russian exports, he said. 

Russia’s warning shots at a cargo ship approaching Ukrainian waters on Sunday increased risks for civilian ships moving grain through the Black Sea, Arlan Suderman, chief commodities economist at StoneX, said in a note on Monday. Ukraine has said that it too would consider any ships moving toward Russian ports as potentially military targets. “That is raising concerns that Ukraine might strike at Russia’s ability to export commodities.” 

The Sukru Okan, a dry-freight carrier, was bound for Izmail when a Russian naval patrol ship opened fire after the cargo vessel’s operators didn’t respond to a request for inspection, Russia’s Defense Ministry said. It was then allowed to resume its trip, according to the ministry. 

Russia warned last month that ships headed to Ukrainian ports would be considered as potentially carrying military cargo, heightening overall risks in the region. The Sukru Okan is listed on shipping database Equasis as owned and managed by OG Shipping Ltd. in Mersin, Turkey.

“These actions exemplified Russia’s deliberate policy of endangering the freedom of navigation and safety of commercial shipping in the Black Sea,” Ukraine’s Foreign Ministry said Monday in a statement.

Ukraine’s sea ports have been blocked since Russia exited the export deal. That has made its Danube River ports, like Izmail, increasingly important to send its crops abroad. 

Katerina Kononenko, an operations manager at Avalon Shipping in Romania — which works with vessels in the Sulina channel and on the Danube — said traffic was normal on Monday.

Wheat futures remain around 22% lower this year amid bumper harvests.

On Friday, the US Department of Agriculture raised its estimate for Russian wheat exports to 48 million metric tons for the 2023-24 season. That means almost a quarter of the world’s wheat trade will now come from Russia.