Wheat prices on a roller-coaster ride in global market as Russia changes its stand

There have been wide-ranging fluctuations in wheat prices in the global market over the last few days in view of the changing stand of Russia on grain exports from Ukraine. First, there came a report on 29 October 2022 that Russia had backed out from the Black Sea Grain Initiative, the agreement on the safe transportation of grain and foodstuffs from Ukrainian ports through the Black Sea route. The report led to wheat prices reaching $9.78 per bushel at the Chicago Board of Trade (CBOT) in the beginning of last week.

Ukraine attacked Russian bases in Crimea with drones. Subsequently, clouds of danger hovered over the three-month-old Grain Corridor Deal. But Russia clarified on Thursday that it would once again participate in the negotiations on the deal. As a result, the wheat prices came back to the earlier level of $9.3 per bushel. In mid-May, after the Russian invasion of Ukraine, the prices had gone as high as $12.8 per bushel. Again, in October, wheat prices surged after Russia intensified its attack on Ukraine.

A surge in wheat prices had exacerbated the crisis for Russia’s allies. Turkey imports large quantities of wheat from Ukraine and even exports it to African countries after grinding. Although China does not import wheat from Ukraine, it does so from other countries. If wheat did not come from Ukraine, its prices would surge in the global market, making China buy wheat at high prices. So, it is assumed that Russia has softened its stand under pressure from its allies.

Uncertainty continues about deal

However, the clouds of danger hovering over the global trade of wheat have not been dispelled yet. Under the deal brokered with it by Turkey and the United Nations (UN), Russia had allowed wheat exports from Ukraine up to November 19. It is not clear as yet if Russia will extend it. So, uncertainty prevails in the international wheat market at present. The extension of the deal would much depend on the G20 Summit scheduled to be held in Indonesia from November 15. Since India has prohibited wheat export, there is not much possibility of any fallout of the developments in Russia on the domestic market.

Ukraine says that under the Black Sea Grain Initiative, a consensus has been reached that 1 crore tonnes of agricultural products can be exported to 43 countries. Ukraine has primarily exported wheat and corn to Spain, Turkey and Italy. It has exported about 68 lakh tonnes of grains till October. This amounts to one-third of its total stocks.

Turkish mediations bring talks back on track

On November 2, Russian President Vladimir Putin said in a meeting with his officials that Ukraine was abusing the permission for exporting foodgrains through the Black Sea route that it had been granted on humanitarian grounds and attacking the Russian fleet deployed there. In fact, Russia wanted to be assured that the permission it had granted to Ukraine for foodgrains exports should not be put to any other use. Turkey came to mediate after these developments.

Putin said in the above meeting that the Russian defence ministry had assured Turkey that the humanitarian corridors would not be put to military use. According to Putin, “I instructed the Defence Ministry to offer full support. However, if Ukraine violates this guarantee Russia, too, may distance itself from this arrangement.”

Russia says that it was ready to supply to the poor countries where Ukraine was exporting foodgrains. It also claims that out of the foodgrains that Ukraine exported, only 4 per cent went to the poor countries while most of the remaining wheat was sent to the European Union (EU) countries. According to Putin, if Ukraine violates the agreement Russia is ready to export wheat to those countries for free.