Expectations that geopolitical risks in the Black Sea will ease accelerated selling in the wheat market. Russian President Vladimir Putin's statement that there was an opportunity to reach an agreement between Russia and Ukraine and that the issue should be resolved by the parties to the conflict strengthened expectations of relief in Russian and Ukrainian grain exports.
Wheat falls to $7.53
The price of wheat per bushel rose to $7.95 in July, reaching its highest level since February 2023. The price later fell to $7.53.
Zafer Ergezen, a futures and commodities markets specialist, said geopolitical risks heightened by attacks in the Black Sea had contributed to the previous recovery. Ergezen also said the war involving the United States and Israel and Iran, rising transportation costs, and increases in fuel and fertilizer prices had supported wheat prices.
Russia and Ukraine are pivotal in global wheat trade
Russia and Ukraine account for approximately 30% of global wheat trade. Ergezen emphasized that developments in the Black Sea are therefore pivotal for global wheat supplies.
The activation of the grain corridor established through Türkiye's efforts eased supply pressures in the market. The resumption of attacks in the Black Sea and an increase in tensions, however, pushed prices higher.
Ergezen attributed this week's decline less to demand dynamics than to easing geopolitical risks, saying profit-taking increased as expectations that grain trade could continue in the Black Sea strengthened.
I view the recent pullback as profit-taking. However, risks remain within the broader picture.
Production costs and weather conditions create pressure
Ergezen said weather conditions posed a risk to the supply outlook and that the impact of El Niño had led to warmer and drier weather. He said this situation had increased concerns about a decline in yields, adding that the effects of El Niño are expected to continue until early 2027.
Ergezen said overall production costs, particularly energy and fertilizer prices, continued to rise. He said fertilizer, transportation and insurance costs remained high because oil prices were elevated, adding that this situation was putting pressure on agricultural commodities.
Easing risks in the Black Sea could push wheat prices lower in the short term. However, wheat prices are expected to remain strong in the period ahead as cost pressures and weather-related supply risks persist across global agricultural commodities.
