Wheat futures extended their gains for a second day, pushing prices towards a two-year high, as increased military activity in the Black Sea between Russia and Ukraine escalated concerns about the security of crucial grain supplies. Ongoing strikes and counter-strikes are causing serious disruptions to shipping and port operations in the region, which is a major global hub for wheat exports. The instability creates significant uncertainty for the timely and reliable delivery of grain to international markets.
European wheat futures, specifically on Euronext, saw a notable increase, reaching €231.75 per ton in one session, the highest level since February 2025. This 7% jump demonstrates the market's sensitivity to even the perceived risk of supply chain interruptions. Although prices later retracted by over 6% on news of potential restorations to Ukrainian shipping, the initial amplitude highlights how swiftly traders react to the potential for disrupted supplies, rather than just shortages.
The conflict's impact is significant on both sides. Ukraine has already lost approximately a third of its grain export capacity from its Black Sea ports due to intensified Russian attacks. Storage capacity at key ports like Odesa, Ukraine's largest, has been reduced by a third. Similarly, Russia is experiencing a decline in seaborne export volumes, partly due to safety concerns in the Sea of Azov following Ukrainian strikes. Analysts have already cut forecasts for Russian wheat exports in July by 20% due to these disruptions, alongside a late harvest and fuel shortages. The market reaction indicates a growing realization that these are not short-term disruptions but could have more serious, lasting consequences for global grain and wheat inventories.
Increased war risk premiums and even refusals by some insurers to offer coverage for vessels in the region are exacerbating the export crisis. For Ukraine, domestic purchase prices at ports have effectively disappeared, and shipowners are no longer providing freight quotes. Russia faces higher costs and potential market share losses as port operations slow, and alternative routes like the Baltic Sea or Caspian Sea are not full replacements, adding to transportation costs and network strain. The situation is leading to delays, expensive freight, and sharp price fluctuations, with the main profit going to competitors who can guarantee supply, such as EU countries, the USA, Canada, and Australia.
