Market Morsel: Grain rallies on Russia’s renege

Market Morsel

2022 in grain has largely been about Russia. We had a huge rally in prices when the war started; then, as a grain corridor deal looked likely, the price started to come under pressure.

The grain corridor deal was brokered between Ukraine, Russia and Turkey. This deal allowed grain exports, provided inspections were carried out on each vessel. The deal was for 120 days, which is coming soon.

We spoke about the grain deal and the planting of the new crop with Ukrainian grain analyst Elena Neroba on the AgWatchers podcast (listen here).

So what is happening just now? Russia suspended the deal over the weekend after a reported drone attack on their vessels. The deal is now suspended but vessels are still leaving Ukrainian ports.

As mentioned many times, the volume of grain/oilseeds from Russia and Ukraine is large (see chart below), and the lack of this volume on the market has the potential to drive prices higher. The market was up A$31 from Friday to Monday as the trade reacted to the news.

It will be interesting to see whether Russia comes back to the negotiating table. It won’t surprise me if this is part of a negotiating tactic to spook the global community into acceding to the demands of Putin.

Whilst this is good news for pricing levels, it is not good for the famine-impacted regions of Africa (see here).