Wheat slides 3% on Ukraine export deal extension
Chicago wheat dropped to a 2-1/2-month low on Thursday after the United Nations announced an agreement to maintain a grain corridor for exports from war-torn Ukraine.
News that the export deal will run beyond its initial period that expires on Nov. 19 also pushed corn lower as flows of Ukrainian grain will now likely continue to reach world markets in the short term.
The most-active wheat contract on the Chicago Board of Trade (CBOT) Wv1 was down 2.7% at $7.96-1/2 a bushel by 0957 GMT, after falling earlier in the session to its lowest since Sept. 1.
The United Nations Secretary General said on Thursday he welcomed an agreement by all parties to extend the Black Sea grain deal, which has allowed some 10 million tonnes of grain to be shipped from Ukrainian ports since August.
Ukraine and Turkey said the agreement would extend the corridor for another 120 days, while Russia’s deputy foreign minister was quoted as saying Moscow was not going “to cut off” the corridor deal.
“The renewal of the deal is going to put some extra pressure on wheat, although most of the market had been banking on an extension,” a European trader said.
“Corn prices could be pressured as the renewal of the deal will allow several million tonnes more corn to reach the market.”
Expectations had grown in the past week that the corridor deal would hold, with a U.N. source saying on Wednesday there were reasons to be “cautiously optimistic” about a renewal.
With the extension priced in by investors to some extent, attention may turn to other unresolved issues including fertiliser exports.
Ukraine has been seeking a one-year extension and the inclusion of the major port of Mykolaiv, while Russia has been striving to boost its grain and fertiliser exports.
“It was in the interest of all the parties to reach an agreement,” Nathan Cordier, analyst with consultancy Agritel, said.
“A renewal was largely priced in by the market, but there are still negotiations taking place on questions like the one-year extension.”
Euronext December wheat BL2Z2 fell in early trade to a new 2-1/2-month low of 314.75 euros a tonne, before paring losses to hold above the 315 euro chart support level.
Most active contracts – Wheat, corn and soy US cents/bushel, Paris futures in euros per tonne
Source: Reuters (Reporting by Gus Trompiz in Paris and Naveen Thukral in Singapore; Editing by Rashmi Aich, Sherry Jacob-Phillips and Vinay Dwivedi)