Agriculture: Russia's Exit from Black Sea Grain Deal Impacts Grain Prices

Agriculture – Russia pulls out of the Black Sea Grain deal

The Black Sea Grain Initiative expired yesterday with Russia not willing to agree on a further extension of the deal. The news saw CBOT wheat at one stage trade more than 4% higher on the day. However, prices eventually settled down on the day. While the end of the deal is certainly supportive of grain prices – given that Ukraine was expected to make up around 10% of global corn exports and around 5% of global wheat exports – we do not believe it will mean significantly higher prices. Supply growth elsewhere this season means that even if we were to lose all corn exports from Ukraine (19.5mt), global corn ending stocks for 2023/24 would be under 2mt less than 2022/23.

For wheat, the impact would be more meaningful if all Ukrainian wheat exports (10.5mt) were lost, as this would leave 2023/24 global ending stocks more than 13mt lower than 2022/23 and at their lowest levels since 2014/15. However, this is a worst-case scenario. In reality, we will not lose all Ukrainian export volumes, given that we will see a pick-up in flows via the Danube and through the EU. Admittedly though this would be a more expensive route, whilst capacity constraints may be an issue.