According to several media reports, commodity traders are worrying that Russia’s military operation in Ukraine may jeopardize this year’s wheat planting and harvesting seasons, and that has caused wheat prices to soar to two-month highs this week.
On the Chicago Mercantile Exchange on Monday, March wheat futures closed at over $8.0075 a bushel, marking the highest close since November 23rd.
On Friday, wheat prices initially jumped, in a move analysts saw as triggered by Russia’s most recent missile strikes on Ukraine. Traders worried that damage to infrastructure from the missiles, or any intensification of the conflict could endanger Black Sea shipments, which are already running one third below the previous season’s output.
Mark Polowy, a senior account executive at Archer Financial Services, said in an interview with Reuters, “Wheat has been the leader linked to increased tension in Ukraine, which could slow the Ukrainian exports and the planting for the 2023 crop and it could also lead to increased sanctions against Russia.”
Traders began worrying about the supply of wheat, from Ukraine to the global market, almost immediately upon hostilities breaking out in Ukraine, just short of one year ago. Together, Russia and Ukraine produce over a quarter of the supply of grains globally.
In mid-2022, shipments were halted due to a combination of the conflict, and Western sanctions against Russia. However the UN brokered a deal, the Black Sea Grain Initiative, which allowed Ukraine to resume exports. The agreement, hammered out between Russia, Ukraine, and Türkiye, allowed Ukraine to resume exporting wheat and other agricultural products to the world, amid the conflict.
The UN had promised Russia it would help the nation resume its own grain shipments, through the Black Sea, which were being impacted by Western shipping restrictions. However Russia’s ambassador to the UN said earlier this month that so far, there have been no shipments of any grain which were shipped due to the agreement.
Meanwhile, according to Rosstat, the nation’s official statistics agency, the Russian grain harvest last year was the biggest since records have been kept.
Overall, the harvest was measured at 153.8 million tons, up 26.7% year-on-year compared to 2021. The wheat harvest alone amounted to 104.4 million tons. However absent the agreed upon UN assistance, Russia hasl not be able to deliver the increased harvest to the rest of the world.
