Russia’s withdrawal from a deal to allow grain to be exported from Ukraine via the Black Sea has sent “shockwaves” through commodity markets. The halt to the deal has sent wheat futures prices soaring, with the Chicago Board of Trade’s most active contract up seven percent at $6.89 (£5.28) a bushel by 10am on Monday.
Russia halted the breakthrough wartime deal which allows grain to flow from Ukraine to countries in Africa, the Middle East and Asia on Monday.
Kremlin spokesman Dmitry Peskov said Russia would suspend the Black Sea Grain Initiative until Moscow’s demands to get its own food and fertilizer to world markets are met.
Peskov said: “When the part of the Black Sea deal related to Russia is implemented, Russia will immediately return to the implementation of the deal.”
The suspension marks the end of an accord which the United Nations and Turkey brokered last summer to allow food to leave the Black Sea region after Russia’s wider invasion of its neighbour worsened a global food crisis.
The initiative is credited with helping to lower soaring prices of wheat, vegetable oil and other food commodities.
The deal has been extended several times and was due to expire on Monday with Russia warning for months conditions for its extension had not been fulfilled.
Sophie Lund-Yates, Lead Equity Analyst at broker Hargreaves Lansdown, told Express.co.uk Russia’s withdrawal from the deal sent shockwaves around the world.
She said: “Ukraine is one of the most important grain and vegetable oil shippers in the world. News that Russia has cancelled a grain-export deal has sent shockwaves through commodity markets because it jeopardises a key trade route for these essential exports.
“The deal that Russia has pulled out of was brokered by the UN, and the termination of the understanding sends a clear signal that Putin’s willingness to cooperate has reached fresh lows.”
Ms Lund-Yates added there will be concerns about what the withdrawal will mean for the price of wheat, and the important grocery items which depend on it.
She said: “We’ve already seen sharp spikes in the price of essentials including pasta because of the conflict and this latest development could feed into grocery inflation again.
“This isn’t the first time Russia’s pulled out of a grain deal and last time the Kremlin made moves to re-join the pact almost immediately – there’s a chance a similar pattern could emerge this time, which would be a relief to consumers feeling the pinch around the world.”
Analysts expect no more than a temporary bump to food commodity prices because countries such as Brazil have ratcheted up wheat and corn exports.
In Europe at midday, the FTSE lost 0.3 percent while Germany’s DAX slid 0.7 percent lower and France’s CAC 40 tumbled 1.4 percent.
In other trading on Monday, US benchmark crude oil lost 99 cents to $74.43 a barrel in electronic trading on the New York Mercantile Exchange. It lost $1.47 to $75.42 a barrel on Friday. Brent crude fell $1 to $78.87 a barrel.