Wheat dropped following the renewal of an agreement that allows Ukraine to safely export grains out of key Black Sea ports, although the duration of the latest extension was disputed.
kraine's Infrastructure Minister Oleksandr Kubrakov said over the weekend that the pact had been prolonged for another 120 days, but Russia and an unnamed Turkish official said the extension was only for 60 days. The top two commodities shipped under the deal are wheat and corn, which also fell.
Russia's invasion of Ukraine sent wheat futures soaring in the first half of 2022 on concerns over severe disruptions to supply. The Black Sea Grain Initiative has enabled exports to flow since it was brokered by the United Nations and Turkey in July, contributing to a decline in food inflation.
Wheat futures in Chicago were 1.7% lower at $6.985 a bushel as of 1:49 p.m. in Singapore after posting the first weekly gain on Friday since early February. Corn slipped 1.1% to $6.275 a bushel, the first drop in five sessions.
Despite Monday's declines, the discrepancy between Russia and Ukraine on the length of extension will likely add a risk premium compared to if both sides agreed from the get go, said Dennis Voznesenski, an agriculture analyst at Rabobank Group based in Sydney.
"If it only lasts for 60 days, it will expire just before winter crop harvest in Ukraine," Voznesenski said. "At that point Russia would likely have more bargaining ability because the world will need the Ukrainian grain more from a seasonal perspective. If it was 120 days it covers the initial harvest period at least."
Ten regions in Ukraine have started planting spring wheat and barley crops earlier than in 2022, according to the Ukrainian Agrarian Ministry. However, the country's farmers may only sow 8.7 million hectares of grain crops this year, more than 20% lower than the previous year, preliminary estimates show.
Soybean futures dipped for a second session, even after the Buenos Aires Grain Exchange slashed its forecast for Argentina's crop to the smallest on record last week. The nation is enduring its ninth heat wave of the growing season, compared with a typical three or four.
Investors are also watching the banking sector for any impact on commodities after last week's turmoil. Early readings of UBS Group AG's agreement to buy Credit Suisse suggest sentiment is turning for the better.
Bloomberg.