News From Ukraine: Russia briefly backs out of grain deal

We want to take the time to check in on farmers in Ukraine amid the ongoing war in the country. Today, we are learning more about Russia’s decision to exit the Black Sea grain deal for a few days.

Latifundist Media has partnered with us to provide boots-on-the-ground coverage:

M Grain has successfully exported around 100,000 tons of wheat and corn since the grain corridor has opened, but the company was prepared for the closure of this route at any moment.

“M Grain was one of the traders to explore Ukrainian grain exports. Our first vessel arrived to Odesa and it all went extremely well. Only in August did we start experiencing difficulties. In September, it took us 1-2 days, but in October, it would take weeks. However, the news about Russia leaving the deal extremely negatively affected our operation. Our initial plan was to keep loading vessels at least until the end of November,” M Grain Executive Director Kyrylo Zlochevskyi

The company was right to have prepared a plan b. Last weekend, Russia announced the suspension of its participation in the grain deal. The reason, provided by the Russian Defense Ministry, was that an attack on Russian ships in Sevastopol Bay was allegedly committed by Ukraine. The grain market responded with an increase in wheat and corn futures by more than $10 per ton on the CME exchange, but three days after this statement, Turkish president Erdogan managed to convince Russia to rejoin the deal. Wheat futures reversed to previous levels.

Despite this, the market is preparing for all range of outcomes. Andriy Vadatursky the Chief Executive Officer of one of the largest grain trading companies in Ukraine, Nibulon, speaks about extraordinary risks in such conditions, saying, “Relying on the corridor is risky. A single missile strike on a ship carrying grain is enough to half trade, making the route uninsurable.”

The Russian side stated that the return to the agreement implies only the first phase of its validity. For context, it expires on November 18th. After that, the participants of the grain deal will again have to seek a compromise for its extension. As long as the prospects of the corridor remain uncertain, Ukrainian businesses are looking for alternative export routes.

“There are some alternatives we have. We as a company used to export goods to the western port of Ukraine, mainly to Poland and Hungary. Also on the expectation that the corridor can stop, we started a program. We used to export wheat and corn to Romania and Turkey by barges through the Port of Izmail,” said Zlochevskyi

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