Putin says "an agreement is possible," Ukrainian Foreign Minister foreshadows new progress in peace talks: CBOT wheat prices fell more than 4% in a single day.

The rare simultaneous optimistic statements from both sides in the Russia-Ukraine conflict regarding the prospects for peace quickly squeezed the Black Sea geopolitical risk premium priced into international grain prices, causing the most active wheat futures contract on the Chicago Board of Trade (CBOT) to fall by more than 4% in a single day.

According to CCTV News, Russian President Vladimir Putin said on Thursday that Russia and Ukraine could reach an agreement to end the war; meanwhile, Ukraine claims that peace talks are expected to see new progress.

Following this news, the CBOT wheat futures contract fell by more than 4% at one point, eventually closing down 2.8%. This is a rare instance of both sides' leaders expressing optimism about the prospects for peace since the last meeting between the two countries in February this year, directly triggering the market to repric the risk of disruption to Black Sea grain exports.

However, neither Putin nor Sebiga provided specific reasons for the progress in the peace process, and hostilities on the battlefield continue. Putin, instead, accused Ukraine of recent attacks on civilian merchant ships as an obstacle to peace negotiations, leaving the decline in geopolitical risk premiums uncertain.

It's rare for top officials from both sides to express optimism in such a synchronized manner.

Speaking at an economic forum in Russia's Far East, Putin said that several countries, including the United States, are prepared to support a peace agreement between Russia and Ukraine. He stated, "But ultimately, this issue must be resolved by the parties involved in the conflict—Russia and Ukraine… Is an agreement possible? In my view, it is."

Meanwhile, Ukrainian Foreign Minister Sebyaga stated at a press conference that peace mediation efforts in the Russia-Ukraine conflict are expected to see new progress, relevant political and diplomatic activities will enter a positive phase, and peace consultations may be restarted.

He stated that an active phase of political and diplomatic engagement would resume, with "multiple countries around the world re-engaging," but offered no further details, only saying, "Please stay tuned for further updates."

The Russia-Ukraine conflict has lasted for four and a half years, becoming the deadliest conflict in Europe since World War II. Against this backdrop, it is rare for both sides to express such optimism about the prospects for peace. The last meeting between the two countries was in February of this year, mediated by the United States.

Expectations of peace talks squeeze risk premium

Since the last meeting between the two countries in February this year, as the United States turned its attention to the war in the Middle East, both Russia and Ukraine have increased their long-range air strikes against targets deep within each other's territories.

The maritime hostilities between the two sides in the Black Sea have also escalated significantly, with successive attacks on ports and commercial shipping, driving up global food prices.

As expectations for peace talks rose, market concerns about the risk of disruption to Black Sea grain exports eased. The geopolitical risk premium previously priced into wheat prices due to port attacks and shipping disruptions was quickly squeezed, leading to a sharp drop of more than 4% in the CBOT wheat futures contract in a single day.

Putin says Ukrainian attacks are an obstacle to negotiations

Despite making positive statements, neither Putin nor Sebiga provided specific reasons why the peace process between the two sides might make progress.

According to Xinhua News Agency, Putin stated that attacks on and hijacking of civilian vessels, and threats to attack civilian aircraft, constitute "acts of state terrorism." Ukraine's Western allies have remained silent, acting as "accomplices in international terrorism." This does not contribute to peace negotiations.

Ukrainian President Volodymyr Zelenskyy warned airlines and insurance companies this week that the presence of Ukrainian drones has made Russian airspace dangerous, but he said that Ukraine's strikes are limited to Russian military facilities.

The day before, Ukraine urged the UN aviation agency to require its member states to ban operations in Russian airspace.

According to CCTV, Putin stated on Thursday that Russia and Ukraine are maintaining contact, primarily through intelligence agencies. However, given recent statements from Kyiv, it is difficult to determine whether these contacts can lead to a peaceful resolution.

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