Russia blows up Ukraine grain warehouses and warns cargo vessels will be “military targets”

20 Jul 2023 --- Just days after Russia pulled out of the Black Sea Grain Initiative, the country has attacked Odesa’s grain terminals and destroyed 60,000 metric tons of grain, according to Ukraine’s president, Volodymyr Zelensky. Grain terminals in the seaport of Odesa caught fire, as seen in footage released to the public by Ukraine authorities.

As Ukraine’s agricultural capabilities are bombarded by Russia’s attacks and affected by the end of the Black Sea grain deal, Russia boasts about its agricultural might.

“I want to assure you that our country is capable of replacing Ukrainian grain both commercially and for free, especially since we expect another record-breaking harvest this year,” says Russian President Vladimir Putin.

Meanwhile, some food commodity prices have spiked this week as uncertainty over the consequences of the end of the Black Sea Grain Initiative has grasped markets.

Wheat commodity prices have spiked this week.European wheat futures soared 7.9% yesterday to €252.75 (US$283.09) and are 11.4% higher than last week. Nonetheless, they remain at similar levels from a month ago. 

Russia’s bumper crops
Russia’s 2022/2023 and 2023/2024 crops are expected to be bountiful and mark export records.

According to the US Department of Agriculture, Russia’s 2024/2024 crop will be above the 2018-2022 average for wheat (7%), barley (13%), corn (15%), soybean (26%), rapeseed (38%) and millet (3%).

Only rice is expected to underperform in the 2023/2024 season (-5%). Data does not include crops in Crimea.

Russian food exports are at historic highs, according to the USDA and could be even higher.

“Russian wheat exports are forecast to hit a record 45 million metric tons in 2022/23, up 36% from the prior year and 3.5 million metric tons above its previous record in 2017/18. This is well above the next largest exporter with EU wheat exports at 35 million metric tons,” notes the USDA.

“Export volumes could be even larger, but the Russian government continues to apply export taxes and quotas, trade-restricting measures that are self-imposed.”  

Meanwhile, Ukraine’s agriculture outlook keeps deteriorating. The country was predicted to produce 58 million metric tons of grain at the start of the year (down 17 million metric tons from 2022’s production), 50 million metric tons in February and around 48.5 million metric tons now, according to the USDA.Ukraine’s agriculture outlook keeps deteriorating.

For market year 2023/2024, estimates are even more dire at 42.5 million metric tons. Moreover, exporting the produced foodstuffs is ever more complex without the Black Sea Grain Initiative.

Cargo vessels “military targets”
With the end of the initiative, all Ukraine food trade through Black Sea seaports has ended. 

“In connection with the cessation of the functioning of the Black Sea Grain Initiative and the сlosing of the maritime humanitarian corridor, from 00.00 Moscow time on 20 July 2023, all vessels sailing in the waters of the Black Sea to Ukrainian ports will be regarded as potential carriers of military cargo,” says Russia’s Defense Ministry.

The successful Black Sea Grain Initiative allowed for the transport of 32.86 million metric tons of foodstuffs and helped lower international food prices, according to the UN.

Ukraine will be able to keep exporting its foodstuffs through land routes, such as the European solidarity lanes.

By Marc Cervera