Andrey Sizov
13.06.2022
This is what has happened around the Black Sea during the last week
* Heavy fighting continues in Donbas. Russian troops advance trying to encircle Ukrainian forces and in the future capture the entire Donets and Luhansk
* Ukraine pressures the West to supply heavy artillery…Russia seems to need more manpower while general mobilization is still politically unacceptable
* NATO official: “the outcome will depend on who has more rounds of artillery ammunition, who has more rockets, who has more people”…and it’s still not clear who has and will have that clear advantage
* Turkey continues its grain diplomacy. Talks in Ankara about deblocking Ukranian terminals didn’t lead to any results. Erdogan says that it will talk to Putin and Zelensky this week. We are skeptical about the outcome
* Kyiv needs grain exports badly but the Kremlin does want something in return, they keep saying that the West should lift some of its sanctions
* What is more concerning is that Kremlin has started to tie the sanctions issue to Russian grain exports…and that could be a gamechanger that is not on the markets’ radar
* Again: the worst-case scenario is not blocked Ukrainian terminals its blocked Ukrainian terminals AND additional restrictions on Russian exports
* Kremlin’s spokesman Peskov: “in order for Russian grain volumes to be delivered to international markets, direct and indirect sanctions against Russia must be lifted”
* Ukrainian exports remain stable but slow – 0.4 mmt of #wheat and #corn exported during May 1 – May 10
* Russian exports are weak. June #wheat export could be below 1.0 mmt for the first time since May-2021. Export quotas are almost over and the ruble is appreciating. The quota is in place until July
* Ukraine seeded 4.6 mln ha of #corn, fully in line with SovEcon’s May forecast….USDA upped their number by 1.0 mln ha to 4.5 mln ha (harvested) in WASDE
* USDA remained pessimistic about the new Russian #wheat crop, a minor revision from 80 to 81 mmt…local forecasters’ consensus is around 87 mmt…SovEcon’s May forecast – 88.6 mmt (the next one is to be issued this week)
* Black Sea crop conditions are deteriorating…Eastern half of Ukraine has been dry, and parts of Central and Southern Russia received almost 0 rain. Temperatures have been 2-5C above normal
* the Black Sea = bullish…Deteriorating crop conditions + new Kremlin’s sanctions narrative – we are watching it closely
