AgriCensus

Grain markets wait and watch as tensions mount over Azov Sea

Black Sea grain markets were unmoved during early trade Monday despite increased tensions on the Azov Sea after the Ukrainian and Russian navies clashed on Sunday, sources have told Agricensus.

Several Ukrainian sailors were injured and three naval vessels were seized after a Russian tanker blocked access to the Azov Sea via the Kerch Strait on Sunday morning.

Global grain markets shrugged off the news, with the cash trade opting to sit back and watch the political situation unfold rather than moving bids and offers.

The bulk of Ukraine’s grain exports leave via ports in the south west of the country, with its Azov Sea ports accounting for just 6% of total grain volumes during October, according to port line up data.

Other markets were also calm, with Black Sea wheat and corn futures in the cleared and bilateral markets steady from Friday.

“Ukrainian clients don’t seem that worried, there’s not been any aggressive buying or selling so far,” one futures broker told Agricensus.

Major US wheat contracts were up in overnight trading, with SRW March up 1.1% to $5.1275/bu and HRW up 0.6% to $4.89/bu – although traded volumes were thin.

The ruble fell about 1% against the dollar over the weekend to 12-day lows, while the hryvnia was unchanged.

Operational

Freight markets were touted as the most likely to experience volatility in the short run.

“The main thing is that owners are not to willing to go to the Azov Sea because at any time the Kerch Strait may be blocked,” a Black Sea grain trader told Agricensus.

“This is going to be main obstacle, but it is all about how much people are going to be willing to pay for the freight,” he said.

There are potential longer-term operational implications should Kyiv pass an emergency security bill, with increased security and border checks likely to add to costs.

A proposal to introduce 30 days of martial law has been tabled by President Petro Poroshenko and is due to be voted on by parliament on Monday.

History

Access to the Azov Sea has threatened to be a flashpoint in tense relations between Moscow and Kyiv since Russia annexed Crimea in 2014, with an increase in tit-for-tat naval skirmishes seen this year.

In July, Ukrainian ministers called for international support after complaining that vessels docking in Mariupol and Berdyansk were being stopped and searched for several days at a time by Russian forces.

And in August, Ukrainian authorities seized a Russian-flagged oil tanker that docked in Kherson, claiming its owner was on a register of international sanctions.

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