Wheat prices up 40% this week as war fuels widespread inflation fears

The war is stalling shipments from one of the world’s most vital breadbaskets

Fri, 04 Mar, 2022 - 14:52

Gus Trompiz and Naveen Thukral

Global wheat prices jumped by more than 6% on Friday and European futures set a new record high on deepening fears that Russia's invasion of Ukraine will cause massive disruption to export supply from the Black Sea region.

Wheat for delivery in May reached €388.75 a tonne after earlier setting a contract high at almost €407.

The war is stalling shipments from one of the world’s most vital breadbaskets.

Russia and Ukraine account for about 29% of global wheat exports, 19% of corn exports, and 80% of exports of sunflower oil.

The conflict has closed major ports in Ukraine, and severed logistics and transport links.

Trade with Russia has also been stifled by the complexity of navigating sanctions and soaring insurance and freight costs.

That leaves grain importers flocking elsewhere, sparking “unprecedented” demand for spot supply, according to adviser Agritel in Paris.

Corn is also nearing a decade high, and soybean oil reached a fresh record earlier this week.

Buyers look for alternatives

With Ukrainian ports closed and operators reluctant to trade Russian wheat in the face of Western financial sanctions, buyers are trying to find alternatives.

That has triggered a surge in demand for EU wheat, according to traders.

The gains are accelerating global food inflation and raising concerns for countries reliant on foreign supply.

That includes Egypt, which already had been struggling to maintain bread subsidies used by about 70m people in the face of a pandemic.

In another sign of the rising pressures, McDonald’s in Japan announced higher prices for burgers and chicken nuggets because of surging costs for ingredients, labour, and transport.

The fighting in Ukraine also threatens planting of crops in the coming months; farmers would usually be gearing up for sowing everything from corn to sunflowers and barley.

The military invasion and hurdles securing inputs now pose a huge challenge.

Corn futures have leaped 17% this week, the most since 2008, and soybeans are poised for a 5% gain.

Major crop importer China is moving to secure essential supplies in global markets; the country is said to have booked multiple cargoes of US corn and soybeans.