(Bloomberg) -- Wheat extended gains after Ukraine used sea drones to cripple a Russian oil tanker and a naval vessel, threatening a key export route for Russian commodities through the Black Sea.
Top wheat shipper Russia moves most of its grain through the waterway and is in the midst of a second bumper harvest, making this a crucial time for getting crops to world markets.
“The risk in the Black Sea is increasing by the day and any threat to Russian exports is much more potent than a threat to the Ukrainian export corridor,” said Ole Houe, chief executive officer of broker and adviser IKON Commodities.
Futures in Chicago climbed as much as 3.4% to $6.545 a bushel on Monday before trading at $6.455 by 11:04 a.m. in Sydney. Prices closed 1% higher on Friday, paring most of an intraday 4.3% gain after the Ukraine attack on the Russian naval vessel. Traffic at Novorossiysk port was halted for several hours.
Kyiv's decision to take the war to Russia in the Black Sea follows Vladimir Putin's July 17 withdrawal from a United Nations-brokered grain deal and a concerted missile campaign against Ukrainian ports. Ukraine's crop exports have been severely reduced as a result, while Russia's have been unaffected.
The Black Sea route also accounts for 15% to 20% of the oil that Russia sells daily on global markets and is also a major transit corridor for Kazakh crude.
Wheat futures are still down almost 20% this year on prospects for bumper harvests from key exporters and a still-large buffer of global stockpiles.
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