Wheat extended gains after Ukraine used sea drones to cripple a Russian naval vessel and an oil tanker over the weekend, posing a risk for a key export route for Russian commodities through the Black Sea.
(Bloomberg) — Wheat extended gains after Ukraine used sea drones to cripple a Russian naval vessel and an oil tanker over the weekend, posing a risk for a key export route for Russian commodities through the Black Sea.
Top wheat shipper Russia moves most of its grain through the waterway. It is in the midst of a second bumper harvest, making this a crucial time for getting crops to markets and ensuring enough supply to constrain global food costs.
In addition to the spike in grain costs, the attack could also prompt increases in freight and insurance, said Andrey Sizov, managing director at SovEcon. Risks in the region have grown after the recent strikes on Ukraine’s Odesa and Danube terminals, followed by the attacks on vessels near Russia.
“During recent weeks, we made a few large steps climbing up the escalation ladder,” Sizov said by phone.
Futures in Chicago climbed as much as 4.1% to $6.59 a bushel on Monday. Milling wheat in Paris rose about 2.4%.
“The risk in the Black Sea is increasing by the day and any threat to Russian exports is much more potent than a threat to the Ukrainian export corridor,” said Ole Houe, chief executive officer at broker and adviser IKON Commodities.
Still, commercial ships continued to pass through the Kerch strait Saturday after the attack, Bloomberg reported. Chicago wheat futures remain more than 15% lower this year as Northern Hemisphere harvests roll in, replenishing near-term supplies in some major exporters.
Read More: Ukraine’s Drone Attack Yet to Jolt Insurance for Black Sea Ships
Egypt, one of the world’s top buyers, plans to hold a fresh import tender on Tuesday. That will offer fresh insights into which wheat-export origins remain the most competitive, after the nation primarily booked Russian supply in its prior tender last week.
–With assistance from Keira Wright.
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