Bombardments Keep Tight Bottleneck on Ukrainian Grain, Russian Bumper Harvest Suppresses Prices

Another barrage of Russian missiles slammed the Port of Odesa overnight, further complicating Ukraine’s attempts to continue shipping its grain exports through the Black Sea without a safe corridor in place. Ukraine recently managed to move a large ship carrying its grain through the Black Sea for the first time since July, but grain exports from the country are still falling at a rate of -50% to -60% per month. Russian bombardments of Ukraine’s port cities can destroy up to 60,000 tonnes of grain in a single night. 

Ukraine is relying more heavily on its river ports, diverting some seabound traffic into the Danube River in recent months. These ports have also been hit by Russian missiles, however, leaving some ships stranded in the river and unable to load for more than a month. Ukraine’s capacity to transfer grain by river, truck, and rail is only a fraction of what the sea ports could handle during regular operations. For now, a Russian bumper harvest is picking up the slack left by diminished Ukrainian supplies, but low prices could soon trigger intervention in the market to revive wheat futures.

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

Shipments of Ukrainian grain to international markets were halved in September compared to the year-ago period, compounding a YoY decline of almost 60% in August. That is a picture of the corn and wheat trade without the Black Sea Grain Initiative, which was not renewed by a July 17 deadline. Prior to that date, MRP noted an expiration of the deal was a likely outcome after the destruction of the Kakhovka Dam in June. The quadrilateral deal between Russia, Ukraine, Turkey, and the UN assured agricultural commodities could safely transit through the Black Sea and through Turkey’s Bosphorus Strait and into the Mediterranean Sea. Before Russia’s formal invasion of the country in February 2022, Ukraine was 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 now-defunct grain deal facilitated the shipment of almost 33 million metric tons of grain product through the Black Sea over the course of roughly a year, cutting wheat prices in half from their 2022 highs.

To ensure that there were little to no options for Ukraine to transport their grain by ship, Russia has tried to use force to cripple Ukraine’s port infrastructure that had been used to facilitate the transport of grain. That campaign began in the Odesa region in July, with hundreds of drones and Kalibr cruise missiles volleyed toward Ukraine’s Black Sea and Danube River ports. Attacks have destroyed tens of thousands of tonnes of siloed grain, as well as administrative buildings, loading equipment, and other port infrastructure. These strikes have continued through the month of September, with the most recent arrivals occurring last night.

The Associated Press reports that the Port of Odesa was struck by at least one Kalibr and two P-800 Oniks cruise missiles in the night. Ukraine’s Economy Minister, Yulia Svyrydenko, said the attack was “massive”, resulting in…