Why Russia Left The Grain Deal

Portfolio Armor's Photo
by Portfolio Armor
Tuesday, Jul 25, 2023 - 12:31
There was no cargo shipping traffic to or from Ukrainian-controlled ports after the deal expired. 

Why The Ukraine Grain Deal Ended

One of the accounts I follow for knowledgeable takes on the war in Ukraine goes by "Chebureki Man" on Twitter. Last week, he offered an excellent explanation of the grain deal, and why Russia let it expire: 

Ukraine couldn't resist taking advantage of the grain deal to stage two strikes on the Kerch Straight bridge.

The strikes accomplished nothing strategic, only succeeding in a temporary reduction of road bridge capacity, while the rail bridge was unaffected.

The grain deal was bringing Ukraine revenues of $500 million per month, $6 billion per year. So, for literally no gain other than a hollow PR victory, Ukraine has destroyed a significant source of revenue.

There were a number of other reasons involved as well for not extending the deal again, including the failure to reconnect a Russian agricultural bank to SWIFT and the failure to retract sanctions against shipping insurance.

The bottom line is that Russia negotiated in good faith on the original six month grain deal and the two subsequent extensions, and neither Ukraine nor the West honored the terms.

Given that Russia disabled Ukraine's port facilities with massive strikes over the last few days, Ukraine will not have the option of thumbing its nose at Russia's warnings and risk shipping grain (and weapons) anyway.

Russia has offered free grain to counties in need, even the West's "food crisis" criticism has been wrecked. Nobody will starve that the West wasn't already starving, but EU farm animals will certainly cost more to feed.

Something to think about when the braying demagogic loons in the West wail about global food security. If it was a genuine concern then they would have honored the terms of the deal.

Why Ukraine's Shipping Industry Is Now Kaput

One reason is as Chebureki Man said above: Russia has been wrecking Ukrainian port infrastructure since the deal expired. 

The censoring below refers to the Ukrainian government's requirement that Ukrainians blur any video of the impact of Russian missile or drone strikes.

But another reason is as our friend Sergei Witte noted below: no one is going to insure Ukrainian shipping now, after Russia announced it would consider any cargo ships heading toward Ukraine as combatants. 

As Serge noted, Russia has also targeted Ukrainian port facilities along the Danube. 

The end of the grain deal and Russia effectively ending Ukraine's shipping traffic are, along with the Ukrainians' fizzling counteroffensive, another sign of the tide turning against NATO's Ukrainian proxies. Evidence of that is former Ukraine hawks such as military strategist Edward Luttwak now calling for peace. 

In Case You Missed It

A commenter on our last post asked if we post the results of out trades that lose money as well as the ones that make money. The answer is absolutely: We post the results of every trade in our weekly Exits posts. Here's how we did on the trades we exited last week

Stocks or Exchange Traded Products


Options Trades

  1. Puts on KeyCorp (KEY 0.00). Entered on May 4th. Expiring today. Loss: 100%.

  2. Put spread on First Financial Bankshares (FFIN 0.00). Entered on May 5th. Expiring today. Loss: 100%.

  3. Put spread on La-Z-Boy (LZB 0.00). Entered at a net debit of $2.95 on June 20th. Exited at a net credit of $0.65 on July 17thLoss: 78%.

  4. Call spread on Morgan Stanley (MS 0.00). Entered at a net debit of $0.72 on July 17th. Exited at a net credit of $1.35 on July 18thProfit: 88%.

  5. Put spread on Netflix (NFLX 0.00). Entered at a net debit of $2.45 on July 19th. Exited at a net credit of $4.50 on July 20thProfit: 84%

  6. Put spread on Tesla (TSLA 0.00). Entered at a net debit of $1.20 on July 18th. Exited at a net credit of $1.85 on July 20thProfit: 54%.

  7. Put spread on Discover Financial Services (DFS 0.00). Entered at a net debit of $0.38 on July 18th. Exited at a net credit of $0.90 on July 20thProfit: 136%.

The last four trades above are earnings trades we entered last week; we have two more earnings trades teed up for Tuesday, one bearish and one bullish. If you'd like a heads up when we place them, feel free to subscribe to our trading Substack/occasional email list below. 


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