Key Takeaways:
Wheat futures hit a three-year high Sept 1 as Russia-Ukraine attacks on Black Sea ports cut combined grain export capacity by more than 97 percent.
"Black Sea wheat is typically the cheapest source globally," Matt Darragh, grains and oilseeds analyst at Kpler, said. "Price-sensitive buyers either cut import demand or accept higher prices — either way, it pushes global food inflation higher."
Russia's grain exports through the Black Sea fell 65 percent year-on-year in July, with bulk carrier departures from grain terminals dropping from 80 to 28, according to Lloyd's List Intelligence data. Ukraine's Odesa port has been effectively shut since late July, and Ukrainian Agriculture Minister Taras Vysotskyi said no new vessels had arrived by mid-August. Ukraine's August grain exports ran at one-fifth of potential capacity.
Russia and Ukraine together supply more than a quarter of global wheat exports. With the Black Sea corridor closed, Ukraine's rail and Danube routes can sustain only about half of normal export capacity, while Russia's Baltic rerouting faces throughput limits against roughly 60 million tonnes of quarterly export volume.
Russia's September wheat exports are forecast at the lowest level since 2010, according to research firm SovEcon. Ukrainian strikes on Novorossiysk disabled three major grain terminals — NZT, NKHP, and KSK — crippling the route that carried over 70 percent of Russia's grain exports. Lloyd's List Intelligence data shows at least 67 vessels waiting off Romania's Sulina anchorage for two days or more, with crews seeking shelter from escalating attacks.
UK feed wheat futures for November closed at £215.75 per tonne on Aug 28, up £10.75 (5.2 percent) over the week, marking the contract's highest price so far. The Relative Strength Index moved from 60 to 80, entering overbought territory. Chicago December wheat gained 12.1 percent Friday-to-Friday, reaching its highest level since February 2023, while Paris wheat futures rose 5.4 percent.
The Black Sea disruption stacks on top of other supply-side shocks. The Strait of Hormuz disruption from the Iran war threatens fertilizer and agricultural input flows. European heatwaves have cut the EU corn crop forecast to 50.1 million tonnes — the lowest since 2007 — and EU soft wheat exports fell 62 percent in the first week of the new season. US Great Plains and Corn Belt drought is pushing major crop prices higher, with the USDA cutting soybean crop condition scores to 58 percent good or excellent.
Turkey has proposed a safe grain export plan through the Black Sea to Russia and Ukraine, but overnight strikes continued. Ukraine warned that reduced farm income from limited exports could cut planned crop areas for 2027 by a quarter. The return of El Niño is expected to further pressure global agricultural production.
This article is for informational purposes only and does not constitute investment advice.
