Russia warns of ‘chaos’ in global food market after Ukraine pummels grain terminals

Three of Russia's largest grain terminals in the Black Sea port of Novorossiysk have ceased operations following a devastating drone strike by Ukraine. Major damage to terminal infrastructure has made grain shipments impossible, according to people familiar with the situation. United Grain's Novorossiysk Grain Plant suffered a collapsed loading gallery, while Demetra's terminal had its gallery and truck unloading facility damaged.

The KSK terminal also faced attacks, as reported by unnamed sources. The attacks on Black Sea commercial vessels and ports have intensified, sparking worries about supply chains. Russia and Ukraine account for over a quarter of global wheat exports, and the strikes unfold amid this year's harvest. U.S. wheat futures surged nearly 4% on Wednesday, marking the largest single-day gain in three weeks.

Ukraine's foreign minister, Maria Zakharova, claimed on Wednesday that Russian strikes on grain and agricultural infrastructure are driving up global food prices and aggravating grain shortages. Zakharova stated that the Ukrainian military campaign aims to incite chaos in the global food market, benefiting certain Western nations.

In response to the attacks, a state of emergency was declared in Novorossiysk, with water supplies suspended. Ship-tracking data from Bloomberg and Kpler reveals that loading activity at the port has ceased nearly entirely. With loading activity halted at ports in the Sea of Azov and now Novorossiysk, Russian and Ukrainian exports are set to decline significantly.

Kpler's lead agricultural commodities analyst, Ishan Bhanu, said that more Ukrainian grain might eventually reach Europe, but European Black Sea ports are already at full capacity and have limited additional space. Russia could potentially transport more grain through its Baltic ports, but they have only exported 400,000 tonnes in their busiest month.

The affected terminals did not comment on the matter. Russian officials are exploring alternative export routes for agricultural products, including the Baltic, Caspian, and Far East seas, as well as overland routes, according to a statement from the agriculture ministry. Satellite imagery from NASA's Fire Information for Resource Management System detected heat anomalies in Novorossiysk, suggesting fires, likely caused by the drones.

Ukrainian President Volodymyr Zelensky blamed Russia for targeting the naval base, the last major stronghold of Russia's Black Sea fleet. Ukraine's security service stated that the military struck the tunnel connecting the Grushovaya oil-storage site with Transneft PJSC's Sheskharis terminal. Three berths at the port were also hit, though exact locations remain unclear.

The absence of fire at the oil terminal might be due to limited geolocation precision. In retaliation, Ukraine has targeted Russian energy assets, including refineries, export terminals, and oil-pipeline infrastructure, aiming to limit Moscow's ability to process and sell crude and fuels.