Wheat rises to three-year high amid war escalation

World wheat prices climbed to their highest level in three years amid fears that further escalation of Russia's war against Ukraine will intensify disruptions to grain supplies from the Black Sea region.

In Chicago trading, wheat futures rose 2.6% on August 27, reaching the highest level since July 2023. A day earlier, quotations jumped by 6.4%, and since the beginning of August the increase has reached about 19%. Later the price stood at around $7.55 per bushel.

The sharp move came after reports of the risk of renewed intensification of Russian attacks. Bloomberg, citing sources close to the Kremlin, reported that Moscow is preparing to step up strikes on Ukraine, including on infrastructure, because it considers peace deal negotiations to be at a dead end. These plans have not been officially confirmed.

Market fears new export problems

The main risk for the grain market is linked to the Black Sea. Russia and Ukraine together account for more than a quarter of world wheat exports and are also major suppliers of corn, barley and sunflower oil. Therefore, disruptions in the operation of ports quickly affect world prices.

In recent weeks, attacks and related shipping risks have significantly limited grain loading in Ukrainian and Russian Black Sea ports. In trading on August 26, the most actively traded wheat contract in Chicago reached the exchange's daily trading limit — the price added 45 cents to reach $7.4825 per bushel.

According to Chris Nicolau, general manager of Advantage Grain, market participants are especially concerned about logistical constraints. If the situation in the Black Sea does not improve and shipping does not become safer, the price increase may continue.

Ukraine has already sharply lowered its export forecast

For Ukraine, problems with sea logistics have already led to a significant revision of export expectations. The Ministry of Agrarian Policy estimated potential agricultural exports in the 2026/27 marketing year at about 64.4 million tonnes. However, if current restrictions persist, the actual volume may be only about 29.6 million tonnes.

Thus, more than half of the products originally intended for foreign markets may remain in Ukraine. In August, exports are estimated at about 1.6 million tonnes against a required average pace of about 5.4 million tonnes per month. Even after expanding alternative routes, their throughput capacity, according to the ministry, may not exceed 2.9 million tonnes per month.

Separately, Ukraine's wheat export forecast was previously cut by about 53% to 8.3 million tonnes. The main problem remains restrictions on the operation of deep-water ports of Greater Odesa, through which the vast majority of Ukrainian agricultural exports normally pass.

Risks extend beyond Ukraine

The situation also creates risks for major grain buyers in the countries of the Middle East, Africa and Asia. Russia and Ukraine are traditionally among the cheapest suppliers of wheat, so when the supply decreases, importers have to look for grain in more distant markets, particularly in Australia and Argentina.

More expensive products and increased transport costs may intensify pressure on food prices. This risk is becoming especially noticeable against the backdrop of already higher energy and freight costs due to tensions in the Middle East.

Based on materials from: Bloomberg, Ministry of Agrarian Policy and Food of Ukraine