European wheat prices surged by 7% on Wednesday, reaching a 17-month high not seen since February of the previous year. This rise was triggered by escalating Black Sea attacks that disrupt key grain export routes. Benchmark September milling wheat on Paris-based Euronext closed at €231.75 ($265) a metric ton. Chicago wheat also saw a 5.6% increase, while Kansas hard red winter wheat futures hit their 45-cent daily limit.
The surge in prices, which has seen an increase of over 13% since the end of last week, is attributed to rumors of a potential closure of the Sea of Azov to shipping, impacting Russia, the world's largest wheat supplier. Russia has intensified attacks on Ukraine's deepwater Black Sea ports in the Greater Odesa area, crucial for Ukrainian grain and other cargo exports. Ukraine's main farmers' union reported a loss of about one-third of its grain export capacity through these vital ports due to Russian missile and drone attacks.
Analysts, like Donatas Jankauskas of CM Navigator, noted that the key concern is not just the actual loss of Ukrainian exports but the risk that buyers may need to shift demand towards EU or other origins if Black Sea flows become less reliable. Shipowners are reportedly refusing to enter Ukrainian ports due to sharply increased war risks, leading traders to suspend purchases. Ukraine's deputy economy minister, Taras Vysotskiy, affirmed the country's commitment to protecting its seaports and ensuring grain exports match or exceed last season's levels, which were around 37 million metric tons.
The rally on Euronext was further amplified by short covering amidst fears that the area could be blocked for several weeks. Concurrently, a heatwave in Western Europe is affecting harvests, with the French farm ministry estimating a 4% decrease in the French harvest and Germany potentially losing 600,000 to 1 million tons in volume. Several Ukrainian grain export terminals have suspended purchases due to the attacks, and some shipowners are refusing to enter Ukrainian ports out of safety concerns.
