Tag Archives: Wheat Markets

Russia Says It Will Rejoin Ukraine Grain-Export Deal

Russia said it would rejoin a deal allowing for the safe passage of Ukrainian grain, ending days of uncertainty over future shipments and feeding some criticism at home that Moscow had capitulated in the standoff.

Over the weekend, Russia suspended its involvement in an agreement with the United Nations and Turkey that was struck in July and allowed for the safe passage of grain exports from war-torn Ukrainian ports through the Black Sea to world markets. Russian authorities had said a maritime corridor used to facilitate the grain shipments had been used in an attack on Russia-occupied Crimea. Moscow threatened to board ships that left without its permission.

Russia’s Defense Ministry said early Wednesday it had received written guarantees from Kyiv that Ukraine wouldn’t use the corridor to attack Russian forces and that those were sufficient to rejoin the deal. President

Vladimir Putin

later Wednesday said that Russia reserved the right to pull out of the deal, but that it wouldn’t interfere in any future grain shipments from Ukraine directly to Turkey.

The justification provided by the Defense Ministry triggered derision in Moscow, where commentators have openly criticized Russia’s execution of the war in Ukraine. Senior military officials have at times drawn fire from pro-Kremlin military bloggers for losing ground to Ukraine’s army in recent months and for other moves these critics have called tactical or strategic mistakes. Russian officials have also had to defend themselves against criticism they have bungled a recent mobilization of reinforcements across the country.

“We trust Kyiv that the grain deal will not be used for military purposes. Brilliant,” wrote political commentator

Pavel Danilin,

director of the Center for Political Analysis, a pro-Kremlin Moscow-based think tank, questioning the logic of trusting Ukraine.

After Russia said over the weekend that it was suspending its participation in the deal, ships continued to pull in and out of Ukraine, navigating through a maritime corridor established to safeguard the trade. Moscow then threatened it would intercept ships that disembarked without permission, but Russia’s navy didn’t stop any vessels.

The relatively smooth operation, despite Russia’s suspension, was taken by some critics as a sign Moscow was powerless to upset the trade, even if it wanted to.

“The Kremlin itself simply fell into a trap from which it did not know how to get out,”

Tatiana Stanovaya,

founder of R.Politik, an independent political-analysis firm founded in Moscow, wrote on Telegram.

An oil refinery in Sicily, owned by Russia’s second largest oil and gas giant Lukoil, acts as a pass-through for Russian crude, which ultimately makes its way to the U.S. as gasoline and other refined oil products. Photo Illustration: Laura Kammermann

Among shipping and insurance executives, though, Russia’s suspension was threatening to dry up underwriting for voyages. Insurers were pulling policies and refusing to write new ones without Russia’s participation in the deal.

“You can’t get insurance with Russia out of the agreement,” said

Nikolas Tsakos,

president and chief executive of U.S.-listed, Greece-based Tsakos Energy Navigation Ltd. Shipowners said insurers have resumed offering cover.

The grain standoff came as Russia faces setbacks on the battlefield and far from it. Ukrainian forces have taken back swaths of terrain that Russian forces had occupied in the early days of the invasion. Meanwhile, Russia’s economic leverage over Europe, in the form of its once-prodigious sales of natural gas, has recently waned—at least temporarily. European buyers have pivoted from Russian supplies, while Moscow cut back sharply on its sales to Europe.

Still, the continent has managed in recent months to sock away enough gas in storage that analysts believe will help it avoid the sort of shortages and rationings many Western officials just a few months ago had been bracing to endure. That new comfort could be short-lived, analysts say, if there is a colder-than-expected winter or infrastructure problems that further disrupt supplies.

Russia’s grain-deal suspension threatened to increase economic pressure on Ukraine, which relied on agriculture for about 10% of its gross domestic product before the war, Western and Ukrainian officials said. The Russian shutdown also imperiled food supplies for millions of people in poorer countries that import Ukrainian wheat.

Russia’s invasion of Ukraine had bottled up those grain exports, sending global prices soaring. The U.N.-brokered deal moderated those prices, but also appeared to give Moscow outsize leverage on markets. As Mr. Putin threatened in recent weeks to leave the deal, Western officials accused him of using food as a weapon.

A U.N. official prepares to inspect in Istanbul a ship from Ukraine loaded with grain.



Photo:

yasin akgul/Agence France-Presse/Getty Images

Ismini Palla,

a spokeswoman for the U.N. at a coordination center in Istanbul that is charged with overseeing the deal, said Wednesday’s pause in shipping, which had been anticipated before Russia’s decision to rejoin the deal, was intended “to provide time for planning and discussions for the next movement of vessels.”

Ukraine shipped nearly 10 million tons of corn, wheat, sunflower oil and other products through the deal’s maritime corridor between August and October, helping to return the country’s exports to prewar levels. More than 100 large bulk ships are involved in the trade.

Russia stopped cooperating with the agreement after it accused Ukraine of using the corridor to attack Russian forces over the weekend. The U.N. said no military vessels are allowed to approach the corridor, which is closely monitored using satellite data.

In threatening to abandon the deal in recent months, Russia had complained that not enough of Ukraine’s grain was going to poor countries and said Western sanctions had slowed Russian food and fertilizer exports. U.S. and European Union officials say the sanctions don’t apply to food products. The U.N. said the measures have created obstacles to financing, insuring, shipping and paying for Russian products.

Russian shipping executives said vessel arrivals at Russian export ports had fallen by 20% over the past two months, with the majority of ships shifting to move Ukrainian cargoes.

U.N. Secretary-General

António Guterres

praised Russia’s renewed participation in the deal. Mr. Guterres “continues his engagement with all actors towards the renewal and full implementation of the Initiative, and he also remains committed to removing the remaining obstacles to the exports of Russian food and fertilizer,” his spokesman,

Stéphane Dujarric,

said.

Russia’s Defense Ministry said Wednesday that thanks to the U.N. and Turkey, “it was possible to obtain the necessary written guarantees from Ukraine” that it wouldn’t use the maritime corridor and Ukrainian ports for combat operations against Russia. Russia “considers that the guarantees received at the moment appear to be sufficient and resumes the implementation of the agreement,” it said.

Write to Jared Malsin at jared.malsin@wsj.com, Ann M. Simmons at ann.simmons@wsj.com and Costas Paris at costas.paris@wsj.com

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Russia Moves to Pull Out of Ukraine Grain Deal After Blasts Hit Crimean Port

Russia said Saturday that it would suspend participation in the export of agricultural products from Ukrainian ports, in response to an attack on the occupied Black Sea port of Sevastopol that it blamed on the government of Ukraine.

The Defense Ministry said in a statement published on Telegram that ships of the Black Sea Fleet and civilian ships involved in ensuring the security of the so-called grain corridor had come under attack. As a result, “the Russian side suspends participation in the implementation of agreements on the export of agricultural products from Ukrainian ports,” the statement said.

The move threatens to derail the United Nations brokered deal that unblocks Ukraine’s vital grain exports through the Black Sea, which is critical to addressing a global hunger crisis and comes a day after U.N. chief

António Guterres

urged Russia and Ukraine to renew the agreement, which is officially set to expire on Nov. 19.

Officials from Russia, Turkey, Ukraine and the U.N. signed the grain agreement in July, freeing millions of tons of food products that had been bottled up in the country since the Russian invasion began in February.

The agreement is one of the few diplomatic breakthroughs of the war and helped to bring the global price of wheat down to prewar levels, helping to ease a global hunger crisis that resulted in part from the conflict. Ukraine provided about 10% of the world’s wheat before Russia invaded.

If shipments of Ukrainian grain are halted, the suspension will likely drive up the global price of wheat, corn and other vital food products.

But Russia’s Foreign Ministry said that Ukraine’s armed forces used “the cover of a humanitarian corridor” to launch massive air and sea strikes and as a result Moscow “cannot guarantee the safety of civilian dry cargo ships participating in the Black Sea Initiative and suspends its implementation from today for an indefinite period.” It said appropriate instructions have been given to Russian representatives at the Joint Coordination Center in Istanbul, which controls the transportation of Ukrainian food.

A Turkish official said Turkey hasn’t been officially notified of Russia’s decision to suspend its participation in the deal. Turkish President Recep

Tayyip Erdogan

helped broker the deal.

Oleksandr Kubrakov,

Ukraine’s minister of infrastructure, said his country will continue supplying grains around the world. “The world should not be held hostage to Russia’s whims, hunger cannot be a weapon,” he said in a Tweet.

Russia’s decision to suspend it is also a major blow to Ukraine’s globally important agriculture industry, which returned to a nearly prewar level of grain exports earlier this month, largely due to the deal. Since the agreement was signed, Ukraine exported 9.2 million tons of food products through a safe corridor in the Black Sea, according to the United Nations.

Russian President

Vladimir Putin

has threatened to abandon the deal in recent months, arguing that not enough of Ukraine’s wheat was going to poorer nations and that not enough Russian food and fertilizers were being exported due to sanctions. Around one-quarter of the food shipped through the deal went to low-income countries, according to the U.N. Ukraine also has shipped wheat to crisis-stricken nations including Somalia, Afghanistan and Yemen under the agreement.

Stéphane Dujarric,

a spokesman for the U.N. secretary-general, on Saturday said, “We’ve seen the reports from the Russian Federation regarding the suspension of their participation in the Black Sea Grain Initiative following an attack on the Russian Black Sea Fleet. We are in touch with the Russian authorities on this matter.”

“It is vital that all parties refrain from any action that would imperil the Black Sea Grain Initiative which is a critical humanitarian effort that is clearly having a positive impact on access to food for millions of people around the world,” said Mr. Dujarric.

In Luch, a village near the Kherson front line, a resident plays with her dog in the basement where she has been living during the war.



Photo:

Virginie NGUYEN HOANG for the Wa

Volunteers distribute humanitarian aid in the village.



Photo:

Virginie NGUYEN HOANG for the Wa

When asked about how Russia’s decision would affect the operation of the grain corridor, a representative of the Joint Coordination Center referred to Mr. Dujarric’s statement.

Ukraine’s foreign minister said in a tweet, “We have warned of Russia’s plans to ruin the Black Sea Grain Initiative. Now Moscow uses a false pretext to block the grain corridor which ensures food security for millions of people. I call on all states to demand Russia to stop its hunger games and recommit to its obligations.”

A worker at a Ukrainian power plant repairs equipment damaged in a missile strike.



Photo:

sergei supinsky/Agence France-Presse/Getty Images

The remains of a house in the southern village of Luch, which has suffered frequent shelling.



Photo:

Virginie NGUYEN HOANG for the Wa

Ukraine President

Volodymyr Zelensky

accused Russia earlier this month of deliberately slowing the passage of vessels through the corridor, creating a backlog of more than 170 vessels waiting to transit. The corridor’s capacity is limited by the number of inspectors from Russia, Turkey, Ukraine and the U.N. who must check each ship as it enters and exits the Black Sea.

Russian Defense Ministry spokesman Lt. Gen. Igor Konashenkov said nine aerial drones and seven maritime drones were involved in Saturday’s attack. He said the air attacks were repelled, but a sea minesweeper, the Ivan Golubets, sustained minor damage, as did some defensive infrastructure in Yuzhnaya Bay, one of the harbor bays in Sevastopol.

“You could hear explosions coming in from the sea,” said Yevgeni Babalin, a dockworker at the Port of Sevastopol. “There are fears that the Admiral Makarov was hit by an underwater drone.They shot at it from the ship and from a helicopter.”

The Admiral Makarov, a frigate, replaced the Moskva as the Black Sea Fleet’s flagship after the latter was attacked earlier this year.

A broker in Odessa who arranges cargoes from Sevastopol to the Middle East said the situation at the port was tense with residents asked to stay inside by Russian authorities.

Mikhail Razvozhayev, the Russian-installed governor of Sevastopol, wrote on his Telegram messaging channel that the attack had caused minimal damage to civilian infrastructure but city services were put on alert. He appealed to residents of the city not to publicize videos or information of the attack that could aid Ukrainian forces “to understand how the defense of our city is built.”

Ukrainian officials haven’t claimed responsibility for previous blasts in Crimea, including a drone strike on the headquarters of the Black Sea Fleet in August, but rejoiced and vowed to reclaim the peninsula annexed by Russia in 2014.

Crimea has served as a rear base for Moscow’s military occupation of a swath of territory in southern Ukraine, where Kyiv’s forces are now seeking to dislodge Russian forces from part of the Kherson region.

Gen. Sergei Surovikin, the recently appointed commander of Russian troops in Ukraine, has acknowledged that the position in Kherson is challenging and that “difficult decisions” might be called for, without elaborating.

Russian-installed officials in Kherson began telling residents to leave the city earlier this month in what they said was preparation for a Ukrainian assault.

Kirill Stremousov,

deputy head of the Kherson region’s Russian-installed administration on Friday said the evacuation of civilians was complete.

Meanwhile, the Russian Defense Ministry spokesman accused the British Navy on Saturday of being responsible for sabotaging Nord Stream pipelines in late September. Western governments have found that explosions rocked Nord Stream and a parallel pair of pipelines, Nord Stream 2. Investigations are continuing. Some German officials have said they are working under the assumption that Russia was behind the blasts.

The U.K. Defense Ministry said in a tweet on Saturday: “To detract from their disastrous handling of the illegal invasion of Ukraine, the Russian Ministry of Defence is resorting to peddling false claims of an epic scale. This invented story, says more about arguments going on inside the Russian Government than it does about the west.”

Write to Ann M. Simmons at ann.simmons@wsj.com, Jared Malsin at jared.malsin@wsj.com and Isabel Coles at isabel.coles@wsj.com

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Commodity Funds Draw Bets Ukraine Invasion, Russia Sanctions Will Stoke Rally

Investors are raising bets that the invasion of Ukraine and sanctions on Russia will further fuel an already-hot commodities rally.

War has gripped global markets, lifting prices for a number of raw materials. Wheat has surged to its highest level since 2008. Corn prices have jumped around 25% so far this year, earlier this week touching their highest levels since March 2013 before paring gains. Aluminum and nickel have jumped to their highest levels in over a decade. 

Federal Reserve Chairman

Jerome Powell

said Wednesday he would propose a rate increase of a quarter-percentage point at the central bank’s meeting in mid-March, spurring wagers that the Fed won’t react too aggressively to curb inflation. 

These developments have helped general commodity mutual funds and exchange-traded funds report net inflows for the eighth consecutive week through Wednesday, according to data from Refinitiv Lipper. That marks the longest streak since a 23-week run that ended in June 2021. Inflows for the week ended March 2, at $867 million, were at a record high, according to data going back to 2011.

The surge extends gains in commodities, many of which reached multiyear highs in 2021. Analysts said global supply of several commodities, already tight because of supply-chain obstacles, unfavorable weather and strong demand, could be strained further. 

“People are looking for a way to get out of inflation’s impact, and commodities really look like a good hedge,” said

Hakan Kaya,

senior portfolio manager at Neuberger Berman, whose firm has increased exposure across commodities from energy to livestock and agriculture in 2022.

Commodity prices tend to rise alongside inflation, and investors often use them to hedge portfolios. Commodity funds invest in both commodity-linked derivatives and the underlying commodities themselves.

The S&P GSCI index, a benchmark for commodities, has added about 30% so far this year, while the broad-based S&P 500 has retreated around 10%. The Bloomberg Commodity Index has gained around 30% during that period.

“This is the type of environment where commodities have proven their worth in terms of why they are in the portfolio in the first place,” said

Matt Stucky,

senior portfolio manager at Northwestern Mutual Wealth Management Co.

Seven-year highs in energy prices are contributing to the boost in commodities. Brent crude, the global oil benchmark, has risen around 50% so far this year, recently trading above $118 a barrel. Higher energy prices have spillover effects: Smelters could cut back on the production of metals, for example, while farmers could pay more to transport grains.

While investors can benefit from rising commodities prices, they pose broader economic concerns. Analysts said higher inflation alongside lower economic growth could increase the risk of recession. Meanwhile, investors are watching the events in Ukraine and the effect of sanctions on Russia. 

“Broad-based commodity exposures have performed strongly and continue to make sense as the conflict continues; ongoing and further escalation can and would likely lead to higher index levels still,” RBC analysts wrote in a Tuesday note.

While Ukraine endures military assaults by Russian forces, analysts are warning that the world’s wheat supply could be severely threatened. WSJ’s Shelby Holliday explains. Photo: Valentyn Ogirenko/Reuters

Write to Hardika Singh at hardika.singh@wsj.com

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U.S. Crops Wither Under Scorching Heat

Drought is blistering key U.S. cash crops, further elevating prices for staples including corn and wheat.

The punishing dynamics of a torrid summer were evident this month on the Pro Farmer Crop Tour, an annual event in which farmers visit key growing areas across the grain belt to gather data on the coming harvest. Driving along state Route 14 outside of Verdigre, Neb., Randy Wiese turned to see a farmer harvesting hay. The piles were small.

“That farmer is sick to his stomach,” said Mr. Wiese, who farms 800 acres of soybeans and corn in Lake Park, Iowa.

He isn’t alone. Farm incomes have been hit hard over the past two years, first when Covid-19 shutdowns hammered prices and afterward when hot, dry weather reduced output, limiting farmers’ capacity to cash in on rising demand and higher prices.

Extreme heat is baking most of the U.S. North Dakota, South Dakota, Minnesota, Iowa and Nebraska all contain areas of extreme drought, according to data from the U.S. Drought Monitor. North Dakota and Minnesota, in particular, are experiencing near-record lows in soil moisture, according to data from the National Oceanic and Atmospheric Administration.

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