Ukraine Grain Shipments Resume As Russia Rejoins Deal, Wheat Futures Tumble

Wheat futures tumbled on Wednesday morning statements from Russia saying it has agreed to return to the Turkey and UN-brokered grain deal to allow for the continued export of Ukrainian grain through a Black Sea ‘safety corridor’. 

Moscow said it has returned to the deal after receiving assurances that Ukraine will not use the maritime safety corridor for military purposes. Russia’s Defense Ministry confirmed it has received “sufficient” guarantees from the Ukrainian government that it will demilitarize the humanitarian corridor, following last week Russia saying its ships had come under drone attack.

“Russia considers that the received guarantees are at the moment sufficient and is resuming the implementation of the agreement,” the ministry said. The vital deal is set to be renewed in mid-November after nearly 10 million tons of grains and other foodstuffs have been sent through it since it was implemented in the summer. Russia announced it had pulled out on Saturday, resulting in a diplomatic scramble to find a way forward.

Grain ships halted off the Istanbul coastline awaiting inspection under terms of the UN deal, Getty Images.

Further, Turkish President Recep Tayyip Erdogan told his parliament that “shipments will continue from 12:00 today as planned,” which had followed a call between Turkish and Russian defense ministers. 

A flurry of calls between capitals laid the groundwork for restoration of the deal, after the United Nations, the EU, and international food monitors warned that blockage of millions of tons of Ukraine grain exports could unleash famine on heavily dependent parts of the globe, such as in Africa and the Middle East. 

French President Emmanuel Macron held a phone call with Zelensky, while Turkey’s Erdogan spoke to President Putin. The Russian leader conveyed to Erdogan in the Tuesday call that he’s seeking “real guarantees from Kyiv about the strict observance of the Istanbul agreement, in particular about not using the humanitarian corridor for military purposes.”

Bloomberg: Chicago wheat futures plunged as much as 6.3%, the most since July, after surging in the first two days of the week. 

Macron and Zelensky agreed that lack of an export safety corridor “again harms global food security” – while Kiev accused Russia of using security concerns in the Black Sea as a “false pretext” to withdraw from the deal.

Commenting on these allegations of Moscow ‘weaponizing food’, Oksana Antonenko, director at Control Risks in London, said “Putin wants to compel the West to negotiate with him as soon as possible to freeze the conflict, his direct proposals did not work, so he is resorting to other strategies like talking about Ukrainian dirty bomb, threatening nuclear escalation or pulling out from the grain deal…all to get them around the table with him. But it remains that “So far it did not work and I think will not work, at least in the near future.” Speculation over the fate of the deal has resulted in prior weeks of volatility and extreme uncertainty impacting agricultural markets.