Wheat tumbles on Putin interview

“No corn this year,” shared a Minnesota producer. “We are too far behind the calendar, in my opinion, for the crop to complete maturity.”

“Time for prevent plant,” echoed a Wisconsin corn grower.

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Russian president Vladimir Putin gave a nationally televised interview in Russia this afternoon and addressed issues of food security surrounding the Russian war in Ukraine. Putin called reports of Russia not allowing Ukrainian grain exports safe passage through the Black Sea “a bluff” and that “there are no problems with shipping grain out of Ukraine.”

Ukrainian ports in the Black Sea have been mined during the ongoing Russian conflict in Ukraine, making safe passage for grain cargoes especially risky. Both Ukraine and Russia dispute which country’s forces placed the mines, though Russian forces have been documented placing mines in Ukrainian wheat and corn fields in regions where they have been forced to retreat. Putin called on Ukraine to remove the mines in his interview.

It is also important to keep in mind that Ukrainian grain shipments in the Black Sea cannot just simply restart. Extensive damage from Russian missile strikes has been incurred at port loading facilities. Plus, shipping insurance risk premiums are likely to remain high enough to deter shipments while harbors remain mined and the Russian naval blockade remains in place.

Putin guaranteed safety for Ukrainian grain exports in the Black Sea and Azov Sea, encouraging shipments out of key Ukrainian export hub, Odessa. Odessa has long been viewed as a strategic target for Putin’s troops to acquire.

Putin also suggested alternative exporting measures for Ukrainian grain, including by railway through countries neighboring Ukraine, including Russia’s key ally Belarus, as well as Romania and Poland, estimating Ukraine could potentially ship 184 million bushels of wheat and 276 million bushels of corn currently locked into storage.

"If someone wants to solve the problem of exporting Ukrainian grain - please, the easiest way is through Belarus. No one is stopping it," Putin said. "But for this you have to lift sanctions from Belarus."

But remember – rail systems in Ukraine use Soviet-era construction and require extra time and cost for railcars to be transferred to the wider European rail systems past the Ukrainian border. Russian missile strikes have also targeted Ukrainian infrastructure, so this is not the simplistic solution Putin implies.

Putin may be beginning to worry about his political goodwill with his country’s farmers. He increased Russian grain export forecasts to 50 million metric tonnes (MMT) ahead of the largest Russian wheat crop expected to be harvested since the fall of the Soviet Union.

My morning column yesterday took a deep dive into how Russian oil companies are circumventing Western banking sanctions to continue selling energy products – albeit at a higher cost and increased logistic patterns – to global buyers, primarily China and India. That should be a key indicator to global grain markets that Russian wheat is going to get onto the market one way or the other.

"The situation will worsen, because the British and Americans have imposed sanctions on our fertilizers," Putin said in the interview, noting that higher global fertilizer prices are not correlated with Russia’s ongoing military occupation in Ukraine and calling for Western sanctions against neighboring Belarus to also be lifted.

As I’ve explained in numerous other columns, this is not true. Russia accounts for some 13% of global fertilizer production so the impacts of Western banking sanctions levied against Russian financial institutions has indeed had a profound upwards impact on global fertilizer pricing, which is most apparent for South American crop producers currently.

"We are now seeing attempts to shift the responsibility for what is happening on the world food market, the emerging problems in this market, onto Russia. This is an attempt, as our people say, to shift these problems from a sick head to a healthy one," Putin said.

Macky Sall, president of the West African country of Senegal, praised Putin’s comments for offering hope to African nations suffering from soaring food costs and growing scarcity. "President #Putin has expressed to us his willingness to facilitate the export of Ukrainian cereals," Sall, who is also the chairman of the African Union, wrote on Twitter.

I caution readers to digest Putin’s words with caution. The interview was likely a propaganda piece to steady morale for the war across the country. Russian troops currently occupy a fifth of Ukraine, though troop morale has been low, especially as Ukraine receives more advance defense technology from Western allies (check out this fascinating New York Times’ Daily podcast episode to learn more about the interworking of the Russian military).

But the interview also suggests that Putin is not yet ready to back down from playing the aggressor role in Ukraine. Wheat and corn prices may be trading lower following Putin’s comments, but they could rise just as rapidly if the market begins to suspect Putin will not follow through on these claims.