Wheat Prices Rise, Putin Wants to Revise the Grain Corridor Agreement with Ukraine

Wheat prices strengthened again. Wheat prices remained in positive territory, even strengthening by 0.41% to US$864.00 per bushel at 4:20 PM WIB on Wednesday (September 14th). The previous day, the December 2022 wheat futures contract on the Chicago Board of Trade (CBOT) strengthened by 0.20% to US$860.50 per bushel.

According to Investing.com data, wheat prices opened at US$866.25 per bushel. The highest price movement today was US$867.30 per bushel, and the lowest was US$857.25 per bushel.

Wheat prices experienced a 1.24% correction on Monday (September 12th) to US$858.75 per bushel. However, wheat prices have risen 7.30% in the last month and increased 26.29% in the last year.

Quoting Bloomberg, wheat futures rose after Russian President Vladimir Putin criticized the grain and seed export corridor agreement he reached with Ukraine. Putin's criticism highlighted the prospects for sales from the Black Sea region or European countries.

He stated that these commodities were not being sent to developing countries but rather to wealthy countries like Europe. This could potentially trigger a global food crisis. He also wants to revise the agreement.

"It might be a good idea to discuss route restrictions with Turkish President Recep Tayyip Erdogan," he added.

Putin explained that the grain export corridor agreement signed by his country with Ukraine, through the mediation of the United Nations (UN) and Turkey, aimed to help alleviate the surge in food prices in developing countries. However, he believes that wealthy Western countries are benefiting from the agreement.

According to the UN, the Black Sea Grain Initiative was launched by the Russian Federation, Turkey, Ukraine, and the UN on July 22, 2022, to allow the resumption of exports of wheat, other foodstuffs, and fertilizers from Ukraine, including ammonia, through a safe maritime humanitarian corridor from three major Ukrainian ports, Chornomorsk, Odesa, and Yuzhny/Pivdennyi, in the Black Sea to the world. This initiative is based on the International Convention for the Safety of Life at Sea, 1974, as amended, (SOLAS) and the International Ship and Port Facility Security Code (ISPS Code). A Joint Coordination Centre (JCC) was established under the Initiative in Istanbul and comprises senior representatives from the Russian Federation, Türkiye, Ukraine, and the United Nations.

Ship Movement

On September 12th, 2.7 million metric tons of grains (including wheat) and other foodstuffs were moved from three Ukrainian ports. So far, 53% of the cargo is corn, 23% wheat, 12% sunflower products, 6% barley, 5% rapeseed, 1% soybeans, with other products making up the remainder.

The destinations for these food shipments are: 28% to low- and lower-middle-income countries, such as Egypt (10%), Iran and India (5%), Sudan and Kenya (2%), and Djibouti, Lebanon, Somalia, and Yemen (1%).

Then, 27% to upper-middle-income countries, such as Turkey (19%), China (8%), and Bulgaria (<1%). After that, 44% was shipped to high-income countries, such as Spain (13%), the Netherlands (8%), Italy (7%), the Republic of Korea (5%), Romania (4%), Germany (2%), and France, Greece, Ireland, and Israel (1%).