Global grain futures surge on referendums in occupied Ukraine

Global wheat and corn futures surged Tuesday after news broke that occupied regions of Ukraine, prompted by Moscow, said they planned to hold referendums over the coming weekend on joining Russia.

European futures led the charge, with Euronext milling wheat December contract hitting a high of €339.75/mt, up €14 on Monday’s settlement, before easing back to €339.25/mt at the close of trade.

Euronext corn hit a high of €331.75/mt, up €8.25/mt on Monday’s settlement, while in the US, CME Kansas HRW futures for December were up 46 c/bu or 5% at $9.56/bu as of 1300 ET Tuesday.

“Referendums to join Russia in occupied regions of Ukraine revive supply concerns,” one market watcher said.

Since August, the flow of grains from Ukraine has increased thanks to a UN-brokered grain corridor from the ports of Pivdennyi, Odesa and Chornomorsk in the Black Sea, relieving some of the pressure on international markets.

"Either the sea [route] shuts down or more acres are lost next year,” another source said. “[There’s a] bit of risk premium back in the market."

Four areas under partial Russian control have announced plans for urgent referendums on joining Russia: Donetsk and Luhansk in the east of Ukraine and Kherson and Zaporizhzhia in the south.

This followed calls from Moscow earlier Tuesday, after Ukrainian forces retook territory in Luhansk, with the move calculated to try and stem further advances, according to market watchers.

Many of the regions have seen Ukrainian forces make territorial gains in recent days as part of a major counteroffensive against the invading Russian forces.

The proposal follows the same playbook that Russia deployed when it annexed Crimea after invading in 2014, with Russian politicians arguing that a vote in favour of joining Russia would mean any further Ukrainian attacks in the four regions would be deemed as an attack on Russia, rather than a counter attack on occupied Ukrainian lands.  

"After the amendments to the constitution of our state, no future leader of Russia, no official, will be able to reverse these decisions," the deputy chairman of Russia's Security Council, Dmitry Medvedev, said earlier Tuesday.

However, it remains to be seen if the occupation authorities in the four regions have enough structural control to mount a referendum, amid signs that Russian troops are flagging and an uptick in partisan resistance.