Wheat prices jump following collapse of major dam in southern Ukraine
WASHINGTON –
Global costs for wheat and corn soared Tuesday after a serious dam in Ukraine collapsed, renewing market fears in regards to the fragility of the nation’s capability to ship meals to Africa, the Middle East and components of Asia because it fights a struggle with Russia.
Wheat costs gained 2.4% in early buying and selling Tuesday on the Chicago Mercantile Exchange, to US $6.39 a bushel. The value of corn rose greater than 1%, to US $6.04 a bushel, and oats gained 0.73%, to US $3.46 per unit. Prices had been increased earlier within the day however light.
The destruction of the Kakhovka dam and hydroelectric energy station, which sits in a Russian-controlled space on the Dnieper River, raised issues about disruption to Ukraine’s inexpensive provides of wheat, barley, corn and sunflower oil attending to growing nations the place individuals are fighting starvation and excessive meals costs.
“Anytime this war shows signs of getting further escalated, there’s a lot of concern,” stated Joseph Glauber, senior analysis fellow on the International Food Policy Research Institute. “Markets react to that.”
Ukraine and Russia are each main agricultural suppliers and the struggle’s disruption to their exports worsened a worldwide meals disaster tied to droughts and different elements. Breakthrough agreements brokered by the U.N. and Turkey final yr obtained meals shifting once more by way of the Black Sea, nevertheless it’s confronted setbacks.
Russia briefly pulled out of the deal final yr, has threatened to go away once more, is accused of slowing shipments from Ukraine and has solely agreed to resume the deal for 2 months at a time.
“People are going to be watching to see what happens with the agreement,” stated Glauber, former chief economist on the U.S. Department of Agriculture. “This reminds everyone that it’s not just pro forma, that this could be a very serious development if indeed the agreement is broken.”
There are large agricultural fields in southern Ukraine the place the dam burst, and whereas the collapse has endangered crops within the path of the floodwaters, Glauber says much less wheat has been planted in that space as a result of it is close to the preventing and rather a lot is rising elsewhere.
The collapse has threatened consuming water provides, with officers additionally warning of a looming environmental catastrophe — pointing to grease escaping from the dam equipment and important flooding.
Andrey Sizov, managing director of Black Sea agricultural markets analysis agency SovEcon, stated the dam collapse appeared “like a big escalation with dire consequences and huge headline risk.”
“This could be just the start of the bull run,” Sizov wrote on Twitter early Tuesday.
The wheat futures rally in a single day and early Tuesday misplaced steam because the day progressed. As of round 3 p.m. ET, for instance, the worth of wheat was all the way down to US $6.27 a bushel.
Wheat, vegetable oil and different meals commodity costs have fallen from report highs final yr after Russia invaded Ukraine — thanks partly to the Black Sea grain deal — however the aid in costs has not made it to markets, grocery shops and kitchen tables.
Citi commodities analysts known as the dam breach a “reminder of lingering inflationary risk in the goods market.”
It’s potential short-term jumps in costs comply with important news occasions, just like the dam collapse, analysts say.
But circumstances are key — and expectations for meals exports from Ukraine will seemingly “continue to diminish as we recognize that Ukrainian production will continue to be severely impaired because of the war,” stated Joe Janzen, assistant professor at University of Illinois Urbana-Champaign’s College of Agricultural, Consumer and Environmental Sciences.
The provide of grain Ukraine is ready to export is 40% decrease than it was two years in the past, Glauber stated.
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Bonnell reported from London.
