Black Sea Grain Shipments Grind to a Halt as Missiles Slam Key Ukrainian Port, Wheat and Corn Prices Gain

The expiration of the Black Sea Grain Initiative has been followed by a two-day missile bombardment of Odesa, home to Ukraine’s largest sea port and a key hub for grain stockpiles. Those attacks, likely meant to caution any shipowners and insurers against transporting Ukrainian cargo through the Black Sea without a safe corridor, have ratcheted up wheat and corn futures. Global grain supplies are likely to tighten in the weeks and months ahead, with Ukrainian exports stranded or forced to move through bottlenecked land and river routes. 

Related ETFs: Teucrium Wheat Fund (WEAT), Invesco DB Agriculture Fund (DBA)

The year-old Black Sea Grain Initiative, a quadrilateral deal between Russia, Ukraine, Turkey, and the UN to assure agricultural commodities could safely transit through the Black Sea and through Turkey’s Bosphorus Strait and into the Mediterranean Sea, has collapsed. Following a partially successful attack by an unmanned Ukrainian sea drone on July 16, which damaged the roadway but left the critical railway portion of the bridge mostly intact, Russia announced that it would not renew its participation in the deal, set for expiry on the 17th. Indeed, eleventh hour negotiations yielded no miracle, despite the UN reportedly offering to reconnect a subsidiary of Russia’s agricultural bank to the SWIFT international payment system. The last ship protected by the grain deal left Ukraine on Sunday.

Ukraine is one of the world’s leading grain exporters, accounting for 10% of the world wheat market, 15% of the corn market, and 13% of the barley market. The initiative facilitated the shipment of almost 33 million metric tons of grain product through the Black Sea, cutting wheat prices in half from their 2022 highs. Traders watched as this agreement expired and, in the two days since, have begun to bid up wheat and corn prices in anticipation of an increasingly strangled supply out of the crop-rich Eastern European region. As of Wednesday morning, wheat futures surpassed the $7.00 per bushel level, up more than 6.5% from Monday’s close near $6.57. Corn, meanwhile, was up 9.6% to almost $5.58 per bushel over the same period. Those gains were intensified by two consecutive nights of Russian missile strikes on the key Ukrainian port city of Odesa – likely Russia’s preventative measure against the Ukrainians trying to ship corn without a deal being in place.

Dozens of drones and several Kalibr cruise missiles were volleyed toward the city on Monday night, but Tuesday night’s attacks appear to have been even more devastating, described as “very powerful, truly massive,” by Serhiy Bratchuk, spokesperson for the Odesa military administration. According to the Ukrainian armed forces, that barrage may have…