Market report: Talks on Black Sea corridor add uncertainty

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The Black Sea initiative, the Ukrainian grain export corridor, continues to keep uncertainty in grain markets in both the short and longer term.

The deal, established back in July 2022, allows the safe navigation of grain, related foodstuffs, and fertiliser from three Ukrainian ports (Odesa, Chernomorsk and Yuzhny).

Megan Hesketh, senior analyst arable AHDB says: “With the deadline for the last extension due on the 19 March, talks took place yesterday (and are ongoing) between Ukraine, Russia, Turkey, and the United Nations (UN). The deal has previously been extended for 120 days, twice.

“It looks as though talks are progressing to secure a renewal, though how long the renewal period is for remains unclear.

“Russian Deputy Foreign Minister Alexander Grushko told Russian news agency TASS earlier this week, that the grain deal has been extended for 60 days only. Half of the previous renewal period. Russia agreeing to a 60-day extension has also been confirmed by the Turkish Defence Ministry (Refinitiv).”

According to Refinitiv, a Russian source earlier in the day said that a 60-day extension meant that after 60 days, one of the parties may raise the issue surrounding the termination of the deal. Russia has consistently pushed to reduce the impact of sanctions on the export of their own grains and fertilisers.

Whereas, Ukraine says it will keep to the 120-day extension and indicated that the original agreement states extensions are possible for a minimum of 120 days and should be amended if this period is shorter. Turkey states that talks are ongoing. Watch this space for more news on this.

What does this mean

Ms Hesketh adds: “Crucially, global wheat markets have been feeling pressure over recent weeks and months. Pressured by cheap ample Russian supplies on the global market, coupled with slow demand, we have seen old crop wheat futures prices move lower than new-crop wheat futures prices in the UK. This looks set to continue.

Uncertainty over the corridor extension does add volatility to markets, short and long term due to how this impacts global supply. However, the market has been expecting an extension to this deal and therefore has been priced into markets accordingly. Today, price reaction we can see prices trading down for UK feed wheat futures (May-23) at £215.50/t and Nov-23 futures at £218.00/t (13:15). I would be inclined to see the renewal of the deal as a watchpoint in the context of new season at this stage, in particular with price direction looking to new crop availability.”

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