The rise in wheat prices on international markets occurred shortly after Russia withdrew from an agreement ensuring the safe transportation of grain ships through the Black Sea. This event reignited concerns about its impact on economically disadvantaged countries dependent on grain imports and Western countries experiencing persistent inflationary pressures.
The Strikes on Odessa Caused Wheat Prices to Rise
Heavy airstrikes targeted Ukraine’s grain storage facilities and port infrastructure in the coastal city of Odesa. These actions followed the UN-brokered termination of the Black Sea grain initiative between Russia and Ukraine.
Under this agreement, there was a significant reduction in grain prices by more than a third (35%). The deal, which has been in effect for just under a year, addressed food shortages resulting from Russia’s blockade of Ukrainian ports, which prevented the shipment of major grain crops in large volumes.
The price of wheat rose nearly 1.5 percent on the Chicago Board of Trade in the morning Thursday. Corn and soybean prices rose similarly. On Wednesday, there was an increase of more than 8% in wheat prices.
Globally, there is a tendency for prices of various agricultural commodities, including rapeseed and sugar, to rise.
Russia Is Using Famine as Terror
As a significant player in the agricultural sector, Ukraine has been recognized for its considerable contribution to the production of grains and oilseeds. It has also been prominent in the past as the world’s fifth-largest exporter of wheat. As a significant player in the world market, Russia has established itself as a major grain exporter.
Moscow believes vessels traveling through the Black Sea towards Ukrainian ports could be perceived as potential military targets.
On Thursday, the European Union’s foreign policy chief said that an entity called Russia is involved in the world’s food shortage.
According to Josep Borrell, it is inevitable that the impending situation will lead to a significant global food crisis. This statement was made before a meeting of E.U. foreign ministers.
In line with previous statements by the U.N. Secretary-General, a warning has been issued that many people could face food insecurity.
Before the termination of the grain agreement, wheat prices had fallen about 14% since January, and corn prices had dropped more than 20%.
The recent rebound in commodity futures has raised fears of a possible spike in the price of critical ingredients, coinciding with the easing of food inflation in the U.K. and other Western countries.
African Countries Will Be Hit Hardest
According to Suzanne Streeter, head of money and markets at brokerage Hargreaves Lansdown, the recent price rises experienced by buyers in western regions are indeed disappointing. However, it must be recognized that Russia’s actions have far-reaching implications, especially for countries currently facing severe drought issues. This is especially true for countries in the Horn of Africa, where millions risk severe food shortages and famine.
Analysts note that regions with significant land expansion, including the U.S., are adversely affected by atypical climatic conditions characterized by high temperatures and insufficient rainfall. Forecasts for the U.S. wheat crop have been reduced, bringing estimated stocks to levels not seen in 16 years.
Streeter said that the confluence of these unfavorable circumstances has led to a marked increase in U.S. wheat futures prices by more than 13% since Tuesday. This development has further heightened concerns about the persistent nature of food price inflation.