Global wheat prices have surged following Ukraine’s strikes on Russian territory. Traders are seriously concerned about potential disruptions to grain shipments from the world’s largest exporter amid attacks on logistics infrastructure.
This was reported by Dengi.ua, citing a Bloomberg report (available here).
How Ukraine’s Strikes on Russia Triggered a Price Spike
Wheat prices surged sharply on Friday as markets began to price in potential disruptions to shipping following Ukraine’s precision strikes on Russian territory.
As noted by Bloomberg analysts Erin Ailworth and Michael Hirtzer, successful attacks on Russian refineries and several tankers could force Russia to close the Volga-Don Canal and the Kerch Strait, which connects the Black Sea and the Sea of Azov. It is known that the passage of merchant ships through the canal connecting the Don River to the Sea of Azov has already been temporarily suspended.
How Much Have Grain Prices Risen on Global Markets?
Although the actual impact of Ukrainian attacks on Russian grain export flows is not yet fully clear, prices reacted instantly and quite significantly:
- wheat prices rose by 4.8% - the largest single-day increase since mid-May;
- Paris futures for milling wheat (a key European benchmark) jumped 5.7%;
- corn prices also rose by up to 2.2%.
What the U.S. Department of Agriculture Forecasts
The sharp rise in prices coincided with the release of the U.S. Department of Agriculture’s (USDA) monthly report. The U.S. agency lowered its global ending stocks forecast to 272.8 million metric tons and projected U.S. wheat production at its lowest level since 1970.
At the same time, despite traders’ justified fears of logistical disruptions, the USDA paradoxically raised its harvest estimates for Russia and Ukraine, citing favorable weather conditions for winter wheat.
What other Risks Exist for Exports?
According to Arlan Suderman, chief economist at StoneX, given its own losses, there is a high risk that Russia may, in retaliation, intensify direct attacks on grain carriers leaving Ukrainian ports.
Meanwhile, the governor of the Rostov Region confirmed that emergency services continued to battle large-scale fires at oil facilities in the port cities of Taganrog and Azov following a massive nighttime drone attack.
