Wheat surged after fighting between Russia and Ukraine escalated, with the destruction of a giant dam and damage to an ammonia pipeline that Moscow sees as key in talks about maintaining a safe corridor for Ukrainian grain shipments.

Ukraine said Russia blew up the dam in the country’s south, unleashing a torrent of water that threatens residents and complicates the battlefield separating forces along the Dnipro river. The dam is some way from the three Ukrainian ports covered under the Black Sea grain deal, but the flooding poses a severe risk to people, transport and logistics.

“The short term impact is the damage of grain silos and other equipment situated in the low banks of the river,” Sergey Feofilov, head of UkrAgroConsult said. “Exactly which silos, whether grains are in the silos, and how much of the grain might be rotting is unclear immediately now. The long-term impact will be much more dramatic.”

Wheat futures in Chicago were up 3.1% as of 1:03 p.m. in London, extending their climb from a 30-month low. Corn rose 1.4%.

More than 80 settlements and Kherson city lie within the flood zone, “which could lead to hundreds of thousands of victims,” Ukrainian Deputy Infrastructure Minister Mustafa Nayyem said on Twitter. The hydro power station built in 1956 provides electricity to more than 3 million people and is a “crucial part of the country’s energy infrastructure,” he said.

Still, Rabobank analyst Dennis Voznesenski said the flooded areas had been under war zone conditions for a while. “The impact on crop production possibly is smaller compared to if this happened during non-war years,” he said.

Separately, Ukraine reported that an ammonia pipeline was damaged by Russian shelling in the Kharkiv region close to the border between the two countries. Russia regards the pipeline, which was shut down during the war, as key in talks on keeping Ukraine shipments flowing through the Black Sea.

Author: James Poole and Áine Quinn