Grain prices shoot back up after Russian missile attack

A Russian missile attack on the Ukrainian port of Odessa drove grain prices back up after they relaxed on news of a United Nations-brokered deal between Moscow and Kyiv struck late last week to move stalled agricultural goods out of the Black Sea.

Wheat future contracts jumped around 4 percent after Saturday’s attack, with Kansas City hard red winter wheat for September opening Monday at $848 per thousand bushels. After news of the Friday deal between Russia and Ukraine, the price had dropped to $816.

Soft red winter wheat jumped nearly 3 percent over the weekend, to $781 from a Friday low of $759. Corn futures rose about 2 percent over the weekend, to $575 from $564.

The Russian missile attack on Saturday drew immediate condemnation from U.S. officials.

“Just 24 hours after finalizing a deal to allow the resumption of Ukrainian agricultural exports through the Black Sea, Russia breached its commitments by attacking the historic port from which grain and agricultural exports would again be transported under this arrangement,” Secretary of State Antony Blinken said in a statement on Saturday. 

“The Kremlin continues to show disregard for the safety and security of millions of civilians as it perpetuates its assault on Ukraine. Russia is starving Ukraine of its economic vitality and the world of its food supply through the effective blockade of the Black Sea.”

On Friday, White House national security spokesman John Kirby described the Biden administration as both hopeful and “clear-eyed” about the deal to get civilian exports moving out of Black Sea ports.

“If it’s fully implemented and complied with it will have an impact, but it’s just too soon to know,” Kirby said.

Russian officials said the strikes were aimed at military targets and shouldn’t affect the agricultural exports that were the subject of last week’s deal, which was negotiated in Istanbul with diplomatic help from Turkey.

“As for the targets that were hit with precision strikes, they are located in a separate part of the Odessa port, in the so-called military part of the military port, and these targets were a combat boat of the Ukrainian naval forces and an ammunition depot, where anti-ship missiles were recently delivered,” Russian Foreign Minister Sergey Lavrov said, speaking in the Republic of the Congo, according to Russian state news outlet RIA Novosti.

On Saturday, Russian Defense Ministry spokesman Lt. Gen. Igor Konashenkov announced that the Russian military had destroyed U.S.-supplied military equipment in the Odessa port.

An “attack launched by high-precision, long-range, sea-based missiles has resulted in the elimination of Ukrainian military ship and a depot of Harpoon anti-ship missiles delivered by USA to the Kyiv regime in the seaport of Odessa,” he said in a video posted to the Telegram channel of the Russian Defense Ministry.

In an email to The Hill, United Nations officials indicated they were pushing ahead with the implementation of the deal despite the proximity of the conflict, saying “the details are being worked out.”

Central to the implementation will be the work of an Istanbul-based joint coordination center staffed by personnel from Ukraine, Russia, Turkey and the U.N. to make sure that wheat and other commodities from the region can be delivered to world markets.

The center is expected to be up and running by Tuesday and ships loaded with Ukrainian grain “may move within a few days,” deputy U.N. spokesperson Farhan Haq said in a briefing Monday.

Haq added that the U.N. believes the Russian missile attack on Odessa “was not a helpful thing.”

“We want all sides, as the secretary-general made clear on Saturday, to fully implement what they’ve agreed to,” he said in reference to the U.N.-brokered initiative.

The U.N. emphasized the limited and strictly civilian nature of the export monitoring facility, saying it will “monitor the movement of commercial vessels to ensure compliance with the Initiative; focus on export of bulk commercial grain and related food commodities only; ensure the on-site control and monitoring of cargo from Ukrainian ports; and report on shipments facilitated through the Initiative.”

The U.N. said the center specifically “will not facilitate the export of food from countries other than Ukraine,” nor will it “facilitate exports of containers and non-food items not included under the provisions outlined in the Initiative.”

The de facto blockade of Ukrainian ports by the Russian Navy, in addition to defensively deployed naval mines, promise to make the facilitation of commerce through the ports of Odessa, Yuzhny and Chornomorsk a difficult and highly sensitive task.

Agricultural economists say that traders of wheat and grain had been anticipating something akin to the deal between Russia and Ukraine on exports for some time.

“Ten or 12 days ago, cash prices and futures market prices for wheat and corn were actually at or below where they were in late January and early February, before Russia’s invasion of Ukraine. That suggests to me that the traders in the market had already anticipated that something like this deal would develop,” Vincent Smith, an economist at Montana State University and a fellow at the American Enterprise Institute, said in an interview.

“Instead of there being a fairly substantial 6, 7, 8, 9, 10 percent impact on futures prices on the announcement of the deal, the drop in prices for corn and wheat contracts were more modest.”