Russia-Ukraine War Threatens Wheat Supply, Jolts Prices

 

Poor harvests have left global wheat inventories low and fighting has jeopardized Black Sea exports                   

    Russia’s invasion of Ukraine threatens a big portion of the world’s wheat supply and has sent prices on a dizzying ride to new highs as well as the sharpest weekly drop in years.

Wheat stockpiles were already running low and prices were the highest in years thanks to two years of poor growing weather when Russia’s attack jammed up Black Sea trading and endangered nearly a third of the world’s exports. The invasion prompted fears of food shortages in countries fed with imported grain and pushed prices to new highs. 

...Still, the benchmark U.S. price, at $11.07 a bushel, is 72% higher than a year earlier and analysts expect the war will keep wheat high. Germany’s Commerzbank AG on Friday boosted its spring-quarter price forecasts by 19% for Chicago futures and by about 14% in Paris.

Rising wheat points to further inflation of food prices and another force blunting the post-pandemic economic recovery. Global food prices hit an all-time high in February, according to the United Nations’ Food and Agriculture Organization. U.S. food prices in February were up 7.9% from a year earlier, according to the Bureau of Labor Statistics, taking a big bite out of Americans’ purchasing power. 

Analysts and traders don’t know yet the extent to which global wheat supplies will be dented by the war. What remains of last year’s crop has been kept off market due to the closure of Ukrainian ports and shippers’ hesitancy to enter a war zone to fetch Russian wheat. Meanwhile, it is unclear if growers in the region will be able to harvest winter wheat, which was planted in autumn, or plant spring crops in the coming weeks.

“Russian ports are operating normally but no one is willing to pay extremely high insurance costs to book cargoes from there,” said Will Osnato, senior research analyst with Gro Intelligence, an agricultural data firm...WSJ