Wheat prices rose by 4-6.4% after Russia's decision to withdraw from the grain agreement

Russia continues its policy of restricting grain supplies to the world market in order to raise food prices. It also drastically reduced gas supplies to the EU, causing accidents at gas distribution stations and explosions on pipelines. However, this blackmail backfired, and European consumers began to buy gas from other suppliers.

The Russian government announced a few days ago about withdrawing from the grain agreement, but clarified yesterday that it is only suspending participation in it until the situation with the October 29 attack on the ship of the Black Sea Fleet of the Russian Federation in Sevastopol is clarified. Putin later confirmed that the massive missile attack on Ukraine on October 31 was in retaliation for the attack on the ship.

In the Kremlin, they are demanding that the grain corridor be stopped and the movement of ships prohibited, as the Ukrainian authorities and the Armed Forces of Ukraine allegedly use it to conduct hostilities against the Russian Federation.

However, yesterday Turkey, the UN and Ukraine agreed on the movement of 16 ships (12 for exit and 4 for entry to Ukrainian ports) on October 31, showing Russia that Ukrainian grain will continue to be exported, even without the participation of Russian representatives in the inspection of the ships.

Wheat quotations on world exchanges reacted to these events with speculative growth:

• by 6.4% or $19.47/t to $324.2/t – December futures for soft winter SRW wheat in Chicago,
• by 5.8% or $19.75/t to $359.6/t - December HRW hard winter wheat futures in Kansas City,
• by 3.8% or $13.3/t to $360.5/t - December futures for HRS durum wheat in Minneapolis,
• by 0.9% or $3/t to $320.75/t - November Black Sea wheat futures in Chicago,
• by 6% or €14.75/t to €352.25/t or $348.95/t - December wheat futures on Paris Euronext.

Russia's withdrawal from the grain agreement may affect the pace of Russian wheat exports, which rose sharply in October against the backdrop of artificial curbs on supplies from Ukraine. According to Rusagrotrans estimates, in October the Russian Federation can export a record 4.7 million tons of wheat for this month, reducing the lag from last year's export rates for July - October from 17% to 4.5% and exporting 14.9 million tons for the season compared to 15.6 million tons last year.

Tenders in Pakistan, Saudi Arabia and Turkey bought cheap Russian wheat last week as prices for Russian 12.5% protein wheat for November delivery fell to $300-305/t FOB, while French 11% protein 5% are offered at $340-345/t FOB.

Pakistan's TSR agency purchased 380,000 tons of Russian wheat for delivery in February-March 2023 at a minimum offer price of $373/t C&F, which is equivalent to $303/t FOB Novorossiysk. Pakistan has already imported 1.385 million tons of the planned 2.6 million tons of wheat for this year.

Export sales of wheat from the USA for October 21-27 increased compared to the previous week from 133 to 137 thousand tons, and in total for the season amounted to 9.646 million tons, which corresponds to last year's pace.

As of October 31, Ukraine exported 12.913 million tons of grain and leguminous crops in the 2022/23 financial year, including 4.221 million tons in October, while last year these figures were 19.41 million tons and 5.047 million tons, respectively.

Compared to the same period of the previous season, exports decreased:

• wheat - from 12.371 to 4.936 million tons,
• barley - from 4.475 to 1.087 million tons,
• of corn - increased from 2.315 to 6.843 million tons.