Commodities
After attacking Ukraine wheat exports, Russia faces own shipping challenge
© Reuters. FILE PHOTO: View of the damage at a grain port facility after a reported attack by Russian military drones in the Odesa region, Ukraine August 2, 2023. Prosecutor General’s Office via Telegram/Handout via REUTERS /File Photo
2/2
By Jonathan Saul and Nigel Hunt
LONDON (Reuters) – Russia’s lack of ships and Western grain traders’ shrinking appetite for business with Moscow are adding to rising costs of moving Russian wheat, at a time when the war in Ukraine has spilled perilously close to vital Black Sea supply routes.
President Vladimir Putin promised to replace Ukrainian grain with Russian shipments to Africa after Moscow in July ended an arrangement that gave Ukraine’s food cargo safe passage in the Black Sea, imposing a de-facto blockade on its neighbour and attacking storage facilities, in an escalation of the war.
Ukraine’s response, sea-drone attacks on a Russian oil tanker and a warship at its Novorossiysk naval base, next door to a major grain and oil port, has added to these new dangers for transport in the Black Sea.
Eduard Zernin, head of Russia’s Union of Grain Exporters, cited a potential aggravation of what he called “hidden sanctions” that “may lead to an increase in freight and insurance costs” for Russia.
This “will be reflected in the price level of wheat and other grains on the world market”, Zernin told Reuters.
Even though agriculture exports are not subject to direct European and U.S. sanctions imposed after Russia invaded Ukraine last year, Moscow says restrictions placed on banking and Russian individuals are “hidden sanctions” on the food trade.
The financial and security risks associated with trading with Russia – compounded by the Black Sea corridor collapse – are driving up costs of freight for Moscow and pushing it toward older and smaller vessels run by less established shipping operators, Reuters reporting based on conversations with 10 marine insurers, traders and shipping companies showed.
The situation is raising doubts about whether Russia can keep up a record pace of exports and if not resolved could push global wheat prices higher, the sources said.
Already, prior to the expiry of the deal, grain carriers and commodity houses had reduced exposure to Russia.
Global commodity houses are no longer helping Russia with the mechanics of trading its grain. Cargill, Louis Dreyfus and Viterra stopped such work on July 1, adding more pressure on Moscow to handle all aspects of grain deals including transport.
Cargill has said it would continue to ship grain from Russia’s ports. It declined further comment.
Dreyfus, Viterra and ADM declined to comment, while another major international group, Bunge (NYSE:), did not respond to a request for comment.
“It is not going to be easy for them (Russia),” said one industry executive with knowledge of grains exports.
Last year, Russia exported a record volume of wheat on ships chartered from international companies and traders. While exports remain strong, in the past few months it has had to source more of its own freight, increasingly relying on a “shadow fleet” of older vessels typically operated by companies based in Turkey and China, three shipping industry sources said.
“There is very little coming out now for international companies”, said the executive, who, like other industry sources consulted for this story, asked not to be named because of the sensitivity of the issue. “Most of what is coming out is dealt with by Russian traders using (shadow) fleet ships, which international traders would not touch”.
In a sign of Russia’s growing hunt for vessels, its requests for charters doubled to 257 in July compared with the same month last year, according to data from maritime platform Shipfix that collates from hundreds of market participants.
The data does not show how many of the requests were fulfilled, or which ship operators were involved.
The requests for ships were up 40% from June, and are likely to climb further as the export season gathers pace.
Denmark’s NORDEN and two other Western shipping groups that declined to be named told Reuters they stopped working with Russia after the invasion of Ukraine in February, 2022.
INSURANCE
Without the Black Sea corridor in place, both Russia and Ukraine warned in July that ships destined for each others ports could be treated as legitimate military targets, which three marine insurance source said was a further blow to Western companies’ risk appetite.
Insurance for ships heading to Russia’s Black Sea ports currently costs tens of thousands of dollars in additional premiums daily, the three sources said, with rates ticking higher following Russia’s attacks on Ukraine’s other waterways through the Danube in recent days and Kyiv’s response.
The Black Sea remains a critical area for Russian exports, with other locations more complicated and costly.
One shipping source familiar with the matter said even before insurance, ship operators were charging up to $10,000 more daily for Russian cargoes than for cargoes leaving nearby ports in Bulgaria and Romania, as the collapse of the deal and Black Sea escalation weighed.
Mike Salthouse, head of external affairs with leading ship insurer NorthStandard, said that ever since the United States and Europe imposed sanctions, some traders and insurers fear the ultimate beneficial owners of Russia’s ports and terminals could be connected to designated individuals.
“The ownership structure is not readily apparent from routine or even enhanced due diligence,” he said, leading to “a level of reluctance with engaging in Russian trades.”
The industry executive said another risk was if a vessel needed to buy fuel from Russia, a situation the source said could create problems with Western sanctions enforcers, making it harder to then conduct non-Russian business.
“It’s not easy to flip into the normal trade after that”, the executive said.
Russia’s Black Sea terminals handle about 70% of the country’s grain exports. They include the Novorossiisk and Taman ports.
“TRADE BARRIERS”
Despite the tensions, global wheat prices remain well below the peak after Russia’s invasion last year triggered fears of a global hunger crisis. The removal of more Ukrainian grain from the world market could add to supply pressure unless Russian exports or large crops from other producers make up the difference.
Two sources said the escalation of tensions in the Black Sea was likely to impact Russia’s export numbers, and was discouraging shipping companies from bringing vessels to Russian ports, especially newer ships that carry more.
In a statement to Reuters, Russia’s agriculture ministry forecast grain exports will fall about 8% during the 2023/24 season from Russian last year’s high of 60 million tonnes. It did not give a reason for the drop.
Wheat exports will be down a little less, to 44-45 million tons, Zernin said, in line with estimates from the International Grains Council.
SHIP BUILDING
The ministry in December announced a plan to build a fleet of 61 new grain ships, citing “sanctions pressure and the refusal of many international carriers to cooperate with Russia”.
Russian exporters need 34 grains ships with a carrying capacity of 60,000 tonnes and 27 with capacity of 40,000 tonnes, the ministry said in December. It did not say when they could be built by Russian shipyards.
Russia’s state-owned agricultural leasing company Rosagroleasing said in March of this year it had placed orders for a fleet of grains ships that it planned to launch within three years.
No orders have currently been reported for Russian companies either domestically or internationally, according to data from valuation company VesselsValue. New ships typically take up to three years to build.
Many of the Russian operated current fleet of 31 mainly smaller dry bulk carriers are over 30 years old, VesselsValue data showed, making it harder to access some ports with stringent requirements for ships over a certain age.
“We don’t see Russia building its own fleet from scratch in the short term in order to meet its immediate needs. The primary focus is going be on chartering from the commercial market,” said Victoria Mitchell, analyst with Control Risks consultancy.
By Anna Hirtenstein
LONDON (Reuters) -Oil prices surged on Friday and were on track for a third straight week of gains as traders focused on potential supply disruptions from more sanctions on Russia and Iran.
futures gained $2.66, or 3.5%, to $79.58 a barrel by 1154 GMT, reaching their highest in more than three months. U.S. West Texas Intermediate crude futures advanced $2.64, or 3.6%, to $76.56.
Over the three weeks to Jan. 10, Brent has climbed 9% while WTI has jumped 10%.
“There are several drivers today. Longer term, the market is focused on the prospect for additional sanctions,” said Ole Hansen, head of commodity strategy at Saxo Bank. “Short term, the weather is very cold across the U.S., driving up demand for fuels.”
Ahead of U.S. President-elect Donald Trump’s inauguration on Jan. 20, expectations are mounting over potential supply disruptions from tighter sanctions against Iran and Russia while oil stockpiles remain low.
This could materialise even earlier, with U.S. President Joe Biden expected to announce new sanctions targeting Russia’s economy before Trump takes office. A key target of sanctions so far has been Russia’s oil and shipping industry.
“That would be the farewell gift of the Biden administration,” said PVM analyst Tamas Varga. Existing and possible further sanctions, as well as market expectations of draws on fuel inventories because of the cold weather, are driving prices higher, he added.
The U.S. weather bureau expects central and eastern parts of the country to experience below-average temperatures. Many regions in Europe have also been hit by extreme cold and are likely to continue to experience a colder than usual start to the year, which JPMorgan analysts expect to boost demand.
“We anticipate a significant year-over-year increase in global oil demand of 1.6 million barrels a day in the first quarter of 2025, primarily boosted by … demand for , kerosene and LPG,” they said in a note on Friday.
Meanwhile, the premium on the front-month Brent contract over the six-month contract reached its widest since August this week, potentially indicating supply tightness at a time of rising demand.
Inflation worries are also delivering a boost to prices, said Saxo Bank’s Hansen. Investors are growing concerned about Trump’s planned tariffs, which could drive inflation higher. A popular trade to hedge against rising consumer prices is through buying oil futures.
Oil prices have rallied despite the U.S. dollar strengthening for six straight weeks, making crude oil more expensive outside the United States.
By Karen Braun
NAPERVILLE, Illinois (Reuters) -If anything can derail a price rally, it is a curveball from the U.S. Department of Agriculture.
Chicago corn futures have ticked slightly lower to start the year, but they had climbed nearly 12% in the final two months of 2024, an unusually strong late-year run.
Speculators now hold their most bullish corn view in two years, and luckily for them, the trade has already accepted that last year’s U.S. corn yield was a whopper.
Friday will feature USDA’s biggest data release of the year, with primary focus on the most recent U.S. corn and soybean harvests. U.S. quarterly stocks, U.S. winter wheat seedings and routine global supply and demand updates will also compete for attention.
U.S. CORN AND BEANS
On average, analysts peg U.S. corn yield at 182.7 bushels per acre, down from 183.1 in November. The trade estimate is more than 5 bushels above last year’s record and above USDA’s initial trendline yield for the first time in six years.
Bearish yield outcomes are less likely when the estimates are already large, and only four of 19 polled analysts see corn yield rising from November. However, the range of trade estimates (2.4 bpa) is smaller than usual, flagging the potential for surprise.
In the last decade, analysts anticipated the wrong direction of U.S. corn yield in January only once (2019). They did so three times for soybean yield (2016, 2019, 2022).
But bets are somewhat off for U.S. soybean yield outcomes because USDA’s slashing of the forecast in November was the month’s largest cut in 31 years. Trade estimates indicate some uncertainty around U.S. soybean production as the ranges for both yield and harvested area are historically wide.
Regardless, U.S. soybean supplies are expected to remain ample and at multi-year highs. However, USDA last month pegged 2024-25 U.S. corn ending stocks below the prior year’s level for the first time.
If USDA cuts U.S. corn ending stocks on Friday as expected, it would be the agency’s seventh consecutive monthly reduction. Such a streak has not been observed in at least two decades, reflective of the strong demand that has recently lifted corn prices.
From a market reaction standpoint, these demand dynamics could be somewhat insulating if the U.S. corn crop comes in larger than expected. The last two times CBOT corn had a distinctly negative reaction on January report day were 2012 and 2024, the latter sparked by a huge yield above all trade estimates.
U.S. WHEAT
USDA will not officially issue 2025-26 outlooks until May, but the wheat market will receive its first piece of 2025-26 U.S. crop intel on Friday with the winter wheat planting survey. Total (EPA:) U.S. winter wheat acres are pegged at 33.37 million, very close to both last year and the five-year average.
Analysts have had a rough time anticipating the planting survey in the last two years, coming in almost 1.4 million acres too high last year but lowballing by nearly 2.5 million acres in 2023.
Wheat traders have struggled to find viable bullish narratives despite wheat stocks among major exporters seen dropping to 17-year lows, so another big miss in the U.S. wheat acreage could either support or undermine the recent sentiment.
SOUTH AMERICA
The U.S. crops will probably dominate the headlines on Friday, but it is not too early to watch out for forecast changes in South America. Analysts see USDA upping Brazil’s 2024-25 soybean harvest to a record 170.28 million metric tons from the previous 169 million.
USDA has increased Brazil’s soy crop in three of the last eight Januarys, both on area and yield improvements, and many industry participants have already been factoring in a number north of 170 million tons.
For Argentina, there are already fears that ongoing dry weather could eventually warrant more significant cuts to soybean and corn crops than are anticipated for Friday. American and European weather model runs on Thursday remained stingy with the rainfall over the next two weeks.
USDA already hiked Argentina’s soybean output last month on higher area. The agency increased the crop last January but reduced it in the prior three Januarys. Current crop conditions are slightly worse than a year ago but better than in the prior three years.
Karen Braun is a market analyst for Reuters. Views expressed above are her own.
Investing.com– Oil prices steadied Thursday as traders digested data showing an unexpected increase in US product inventories, while weak economic data from top importer China weighed.
At 05:25 ET (10:25 GMT), expiring in March gained 0.1% to $76.25 a barrel, while rose 0.1% to $73.37 a barrel.
The crude benchmarks had slumped more than 1% on Wednesday, but trading ranges, and volumes, are likely to be limited throughout Thursday with the US market closed to honor former President Jimmy Carter, ahead of a state funeral later in the session.
China inflation muted in December
Chinese inflation, as measured by the , remained unchanged in December, while the shrank for a 27th consecutive month, data showed on Thursday.
The reading pointed to limited improvement in China’s prolonged disinflationary trend, even as the government doled out its most aggressive round of stimulus measures yet through late-2024.
China is the world’s biggest oil importer, and has been a key source of anxiety for crude markets. Traders fear that weak economic growth in the country will eat into oil demand.
The country is also facing potential economic headwinds from the incoming Donald Trump administration in the US, as Trump has vowed to impose steep trade tariffs on Beijing.
US oil product inventories rise sharply
U.S. gasoline and distillate inventories grew substantially more than expected in the week to January 3, government data showed on Wednesday.
inventories grew 6.3 million barrels against expectations of 0.5 mb, while grew 6.1 mb on expectations of 0.5 mb.
Overall crude also shrank less than expected, at 0.96 mb, against expectations of 1.8 mb.
The build in product inventories marked an eighth straight week of outsized product builds, and spurred concerns that demand in the world’s biggest fuel consumer was cooling.
While cold weather in the country spurred some demand for heating, it also disrupted holiday travel in several areas.
EIA data also showed that US imports from Canada rose last week to the highest on record, ahead of incoming U.S. president Donald Trump’s plans to levy a 25% tariff on Canadian imports.
Canada has been the top source of U.S. oil imports for many years, and supplied more than half of the total U.S. crude imports in 2023.
Strength in the also weighed on crude prices, as the greenback shot back up to more than two-year highs on hawkish signals from the Federal Reserve.
A strong dollar pressures oil demand by making crude more expensive for international buyers.
(Ambar Warrick contributed to this article.)
Forex2 years agoForex Today: the dollar is gaining strength amid gloomy sentiment at the start of the Fed’s week
- Forex2 years ago
How is the Australian dollar doing today?
- Forex2 years ago
Unbiased review of Pocket Option broker
- Forex2 years ago
Dollar to pound sterling exchange rate today: Pound plummeted to its lowest since 1985
- Cryptocurrency2 years ago
What happened in the crypto market – current events today
- World2 years ago
Why are modern video games an art form?
- Commodities2 years ago
Copper continues to fall in price on expectations of lower demand in China
- Forex2 years ago
The dollar is down again against major world currencies
