The war in Ukraine is no longer shocking the wheat market

Wheat prices are falling.
Wheat prices are falling.
Image: Reuters/Amira Karaoud
We may earn a commission from links on this page.

When Russia invaded Ukraine in late February, wheat prices, which were already high because of pandemic-related supply chain shortages and severe weather, surged due to the anticipated cutoff to the global wheat supply. The two countries together export about 30% of the world’s wheat.

Soaring wheat prices made pantry foods, from rice to bread, more expensive. But prices are now falling.

On March 7, wheat traded at a record high of $12.94 a bushel. The price has since dropped 27% to $9.39 on June 28.

“Wheat has broken down to levels not seen since the very beginning of the Russian invasion of Ukraine,” said Jake Hanley, a managing director at Teucrium, an agricultural investment firm. “That is in itself significant.”

Why the drop? The markets are responding to Russia and Turkey saying they want to discuss a safe passage to ship Ukrainian grain through the Black Sea. Millions of metric tons of wheat and other grains are stuck in Ukrainian ports due to Russian forces either blockading or occupying them.

But analysts have doubts. It’s unlikely that the grains will be moving in the near term, said Hanley, as ports have been destroyed and seaways need to be de-mined.

Other factors that could tame global inflation

Corn and soybean prices also have started to fall, due largely to expectations of favorable weather for these crops. The US Department of Agriculture will release reports on June 30 that will estimate domestic inventories as well as how many acres of corn and soybeans were planted, which could weigh in on prices.

A pullback in consumer demand could also ease inflation. Oats are largely used for livestock feed. The recent drop in oat prices suggests there is less demand for meat, said Tom Brady, executive director of the JPMorgan Center for Commodities at UC Denver Business School. During the pandemic, meat prices soared due to labor shortages and high freight costs.

Another sign food inflation may have peaked? Global food prices have fallen from record highs set in March in part due to the lifting of export bans and covid lockdowns in China.