Wheat prices hit 14-year high as Russia’s invasion of Ukraine disrupts supply from region

Chicago wheat rose for a fourth straight session Thursday to hit a 14-year high, as damage to Ukraine’s export infrastructure following Russia’s invasion raised concerns over longer-term disruptions to supply from the Black Sea region.

Russia’s invasion of Ukraine could devastate global grain markets so deeply that it’s likely to be the biggest supply shock in living memory.

That’s according to Scott Irwin, an agricultural economist at the University of Illinois. Tens of millions of acres of grain production are at stake, he wrote Wednesday on Twitter.

“I am convinced it is going to be the biggest supply shock to global grain markets in my lifetime,” Irwin said.

The world “desperately” needs farmers to plant more acres in 2022, he said, but “basically nothing can be done in the short-run except to run up the price of grain high enough to ration demand.”

Ukraine and Russia together account for more than a quarter of the global trade in wheat, as well as a fifth of corn sales. Prices for those staple crops are soaring on concerns over supply disruptions at a time when global food prices had already reached record highs.

The most active wheat contract on the Chicago Board of Trade (CBOT) was up 5.1%, at $11.13 a bushel, by 1:30 a.m. GMT, after climbing to its highest since March 2008 at $11.34 a bushel earlier in the session. The wheat market has rallied around 30% in four sessions.

Ukraine has suffered damage to its ports and other export facilities with Russian troops invading the country, while Western sanctions have hit Russian supplies.

Russian troops are in the Ukrainian port city of Kherson and forced their way into the council building, the mayor said after a day of conflicting claims over whether Moscow had made the first major gain of a city in its invasion that began eight days ago.

The United States is preparing a sanctions package targeting more Russian oligarchs as well as their companies and assets, two sources familiar with the matter said Wednesday, as Washington steps up pressure on Russian President Vladimir Putin.

The European Union will consider letting farmers use fallow land, notably to grow protein crops for livestock feed, to counter disruption to supply from Ukraine, officials said.

In the soybean market, Brazil’s 2021-22 crop is likely to be 121.17 million metric tons, StoneX consultancy forecast, cutting its February projection by 4.2% due to a drought that has hurt farms in the south.

China bought soybeans from the United States on Tuesday as American cargoes were competitive against Brazilian shipments, despite it being the peak period for South American soy exports.

China booked at least five cargoes (around 300,000 metric tons) of U.S. soybeans for shipment in April-May, according to an Asia-based trader with knowledge of the deal.

Commodity funds were net buyers of CBOT wheat futures contracts, and net sellers of corn, soybean, soy-oil and soymeal futures contracts on Wednesday, traders said.

Even before Russia’s war with Ukraine, food inflation was already plaguing global consumers. Extreme weather has made it harder to grow crops, while a shortage of workers and higher shipping costs has snarled supply chains.

The world’s grain inventories are also very tight, so any prolonged disruptions to supplies from Russia or Ukraine has the potential to dislocate markets for years to come.