Wrapup 3: U.N. Black Sea grain pact under threat as Russia quits
31/10/2022 17:51
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Russia withdraws from Black Sea pact, cites attack on
fleet
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Ukraine grain exports continue despite Russia's decision
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France working to boost Ukraine exports via land routes
(Adds comment, updates prices)
By Nigel Hunt and Naveen Thukral
LONDON/SINGAPORE, Oct 31 (Reuters) - Grain was flowing
out of Ukraine at a record pace on Monday under an initiative
led by the United Nations aimed at easing global food shortages
despite Russia warning it was risky to continue after it pulled
out of the pact.
Russia said on Monday that the deal was hardly feasible as
it was impossible to guarantee the safety of shipping after its
withdrawal over the weekend following what it said was a major
Ukrainian drone attack on its fleet in Crimea.
Other participants, however, were pressing ahead with the
deal while France said it was talking to other European Union
states about how to boost Ukraine grain exports via land routes.
Ukraine is one of the world's largest grain exporters and
the conflict with Russia led to the closure of its seaports in
February, driving up food prices and contributing to a steep
rise in acute hunger across the globe.
The deal, signed on July 22, created a safe corridor to
allow exports to resume from three Ukrainian ports and helped to
ease the crisis with more than 9.5 million tonnes of corn,
wheat, sunflower products, barley, rapeseed and soy exported
under the pact.
U.N. aid chief Martin Griffiths said on Monday the corridor
does not provide cover for military action, adding there were no
ships involved in a deal were transiting it on the night of Oct.
29, when Russia says its vessels in the Bay of Sevastopol in
Crimea were attacked.
A record volume of 354,500 tonnes of agricultural products
was carried on vessels leaving Ukrainian ports on Monday as part
of the Black Sea grain deal, a spokesperson for Odesa's military
administration said.
"Civilian cargo ships can never be a military target or held
hostage. The food must flow," tweeted Amir Abdullah, the U.N.
official who coordinates the programme.
Russia, however, cast doubts about the future of the pact.
"In conditions when Russia is talking about the
impossibility of guaranteeing the safety of shipping in these
areas, such a deal is hardly feasible, and it takes on a
different character - much more risky, dangerous and
unguaranteed," Kremlin spokesman Dmitry Peskov told reporters.
GREATER RISKS
Lloyd's of London insurer Ascot said on Monday it was
pausing writing cover for new shipments using the Ukrainian
grains corridor.
"From today we are pausing on quoting new shipments until we
better understand the situation," Ascot head of cargo Chris
McGill told Reuters. "Insurance that has already been issued
still stands."
Marcus Baker, global head of marine and cargo with broker
Marsh, said that the change in the risk environment over the
last 48 hours was "very significant".
"Given the change in circumstances it is not surprising that
underwriters have taken the decision to suspend the facility
until there is greater clarity," Baker said.
Turkey, which helped broker the deal, remained committed to
the deal which involves the inspection of cargoes at a Joint
Coordination Centre in Istanbul.
"Even if Russia behaves hesitantly because it didn't receive
the same benefits, we will continue decisively our efforts to
serve humanity," President Tayyip Erdogan said in a speech.
Turkish Defence Minister Hulusi Akar told his Russian
counterpart Sergei Shoigu on Monday that Moscow should
re-evaluate the suspension of its participation.
GRAIN PRICES CLIMB
Wheat prices Wv1 rose on Monday, climbing around 5% to
$8.71 a bushel in Chicago, but remained far below a peak of
$13.63-1/2 set in early March shortly after the conflict began.
The strong pace of wheat exports from Russia, which
harvested a record crop this summer, has helped to bolster
supplies on the world market.
Consultancy Sovecon on Monday estimated that Russia would
export 4.5 million tonnes of wheat in October, up from 2.8
million in the same month last year.
Corn prices Cv1 rose around 1% to $6.87-1/2 a bushel in
Chicago on Monday while soybean oil BOv1 rose more than 2% to
73.36 cents per lb.
Traders warned that hundreds of thousands of tonnes of wheat
booked for delivery to Africa and the Middle East could now be
at risk.
"If I have to replace a vessel which was due to come from
Ukraine, what are the options? Not much really," said one
Singapore-based grains trader who supplies wheat to buyers in
Asia and the Middle East.
Ukraine is also a major exporter of corn and there were
concerns that shipments to the European Union were at risk.
"As far as Europe is concerned, corn is a bigger issue than
wheat as we are getting into peak season for Ukrainian corn in
November," said one grain trader said.
Analysts warned that although global agricultural commodity
prices have come off record highs in recent months, local retail
food prices remain high and could now face further upside.
"Typically, it takes about two months for higher grain
prices to filter through the supply chain and impact consumers
at the retail level," said a Sydney-based analyst.
"But food processors do not have much forward coverage, so
it is likely to be a lot quicker."
(Repoting by Reuters bureaux, writing by Nigel Hunt, editing by
David Evans)
((nigel.hunt@thomsonreuters.com; +44 (0) 7990 561421; Reuters
Messaging: nigel.hunt.thomsonreuters.com@reuters.net))