UKRAINE'S stunning success in winning back territory in its south-east from the Russians has grains industry analysts watching closely, saying rhetoric out of Russia suggested the Black Sea freight corridor, which has allowed grain out of Ukraine, might be in danger.
"The Ukrainian army's rapid advance in eastern Ukraine has surprised strategic types," said Commonwealth Bank commodity analyst Tobin Gorey.
"There are still a host of possibilities in the conflict but the situation has evolved quickly and it is time for us to be on our mental toes to be ready," he said.
Grain markets internationally have risen sharply over the weekend, with price gains of more than 5 per cent across major wheat futures exchanges, not only in the US but in Paris.
Mr Gorey said market sentiment around comments from Russian president Vladimir Putin around the export corridor was a key factor.
"Reports that shippers are now (even) more reluctant to commit vessels to Ukraine's Black Sea corridor is a definite negative for volumes coming out of that region."
Andrew Whitelaw, Thomas Elder Markets commodity analyst, said Mr Putin's rhetoric was in line with his tactic of manipulating access to commodities.
"We're seeing it with energy with him turning off the gas pipelines to Europe and we could see it with grain where restricting access will hurt the Middle East," Mr Whitelaw said.
He said that internationally, exporters remained very nervous about the risk of exporting grain from Ukraine.
"I, for one, would be very hesitant about sending a vessel into the Ukrainian ports at present for fear of being stranded."
"The concern from the trade is that the naval blockade will recommence.
"It is a really risky place to be doing business at present and now that Russia may be looking at options in light of what has happened in eastern Ukraine this could amplify further.
"While the corridor has helped get some grain out of Ukraine the market is now realising this volume is very much going to be capped compared to what we normally see in that part of the world."
Outside the Black Sea Mr Gorey said there were also other factors that were pushing grain prices up.
"India's moves to slow rice exports has some spillover for wheat. "Rice supplies globally are comfortable but India accounts for around 40 per cent of global trade, and India forcing a higher price for an alternative staple cereal alters wheat prices' rationing task."
Locally, new crop wheat futures have kicked slightly to just over $400 a tonne, but cash prices remain lower at around $380/t, an improvement on the bottom of the recent market around three weeks ago.
A surging Australian dollar is proving an obstacle for gains at a local level, but the big gains overseas may translate into some rises in farmgate prices this week.
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