“Loading is at a standstill. It is not just the ports: you can’t get a ship in there. Nobody wants to get stranded,” said Mr Abbassian. Lloyd’s List reports that the northern Black Sea and the Azov have been declared “warlike operations areas’, implying double pay for crews, if you can get them.
Insurance rates are prohibitive and banks are refusing letters of credit, even though grains, fertilisers, and energy products are exempt from sanctions. Shippers are scrambling to find out what it means for a counterparty to be “connected with Russia”.
Everybody is wary of the US Treasury’s sanctions police, known as OFAC. The US law firm Crowell and Moring said clients fear that they may be caught in the net inadvertently, given that targeted oligarchs control much of Russia’s agro-industrial nexus in one way or another. Every transaction has to be screened to the finest detail.
“Russian and Ukrainian wheat are not being offered. Critical corn flows to the world are being stymied. If Ukraine farmers do not plant substantial quantities of corn next month, the supply crunch will be very severe,” said Rabobank.
Smaller farmers in Russia have been shut out of the domestic credit market just before planting season. Emergency tightening by the central bank has lifted average loan cost to 27pc this week.
Chicago wheat futures have hit an all-time high of $1,131. The squeeze is worse for the rest of the world because the broad dollar index is up 30pc since the last peak in 2008.
For good measure, Rabobank says we must contend with intense La Niña weather patterns and drought in Brazil and Argentina. “Grain shortfalls are likely to be so pronounced as to require demand destruction, or rationing,” it said.
The commodity index of the International Monetary Fund – purer than misleading market indexes – shows that primary commodities are today more expensive as a whole in real terms than in 2008 even in dollars. It is much higher for Europe or Africa. This is fast resembling the raw material shock of the early 1970s.
Brent crude hit an all-time high in euros and sterling yesterday morning. But unlike the last oil shock, this shock is spread across every sector of energy. European natural gas contracts for April hit a new high of €198 MWh. Thermal coal has risen 75pc this month.
