A devastating drone attack on the Danube port of Reni in Ukraine has sent shockwaves through the global grain market as wheat prices surged to their highest level in five months.
The attack, which occurred on Monday and resulted in the destruction of a crucial grain hangar, comes on the heels of Russia’s termination of a deal that allowed Ukraine to ship its crops across the Black Sea.
The situation has intensified efforts to cripple a vital export route for Ukrainian grain to reach world markets, and experts fear the impact will be felt most acutely in the wheat and corn sectors.
Michael Magdovitz, a senior commodity analyst at Rabobank Group, while explaining the devasting nature of the attack said, “This strike on the Danube is a huge deal.” The disruption to export capacity is expected to have the greatest effect on wheat, followed by corn, and extend beyond Reni, as the Odesa ports have also been targeted by Russian forces.
The attack on Reni is a severe blow to Ukraine’s grain trade, as the port is one of the country’s largest river ports for grain and sits on the Danube, adjacent to Romania.
Local traders had been expanding capacity at Reni in response to Russia’s sea blockade, which aimed to stifle Ukrainian grain exports.
Transporting vegetable oils by truck and train may still be an option, but it is less cost-effective for grains to be exported in this manner, further exacerbating the impact on Ukraine’s grain market, according to Magdovitz.
In the aftermath of the attack, wheat futures surged by as much as 2.6% in Chicago to $7.7725 per bushel, the highest since February 21. Corn for December delivery also saw a rise of up to 0.7%.
The full extent of the attack’s impact on grain exports from Reni remains uncertain, but the strikes undoubtedly increase operational risks for the already vulnerable grain supply chain.
With a vital export route now under threat, the situation warrants close monitoring as the global grain market navigates the complexities of geopolitical tensions and supply disruptions.
