Wheat extends July rally amid Black Sea escalation

Wheat climbed to its highest level in two years on the Chicago and Paris exchanges as escalating geopolitical tensions and deteriorating weather conditions in key producing regions heightened concerns over global grain supplies.

Benchmark Chicago wheat futures rose 2.2% and are on track for a fourth consecutive weekly gain. In Paris, wheat prices have advanced about 5% this week, while corn also moved higher on Friday.

Grain markets received additional support as Russia and Ukraine intensified attacks on each other’s export corridors, disrupting logistics during the peak harvest period. Together, the two countries account for more than one-quarter of global wheat exports and around 10% of global corn exports.

According to Kpler grains and oilseeds analyst Matt Darragh, recent shipping disruptions and threats to key ports, including Novorossiysk, have complicated Russian grain exports. Whether the lost export volumes can be recovered in the coming months will depend on how long the current logistical restrictions remain in place.

In the Red Sea, Iran-backed Houthi forces attacked two Saudi oil tankers, prompting US President Donald Trump to warn of a “major military response” if further attacks occur.

Wheat extends four-week rally

Weather conditions are providing additional support to grain prices. Extreme heat has reduced crop prospects in France and Germany, while European Union grain production is projected to decline by more than 9% this year, marking the sharpest annual drop in more than two decades. In North Dakota, one of the main US wheat-producing states, intense heat is stressing spring wheat crops and threatening yields.

“The wheat market clearly demonstrates how significantly geopolitical developments can reshape market dynamics, particularly when supported by strong fundamental factors,” CRM AgriCommodities said, highlighting “the shift of grain supply chains to the front line of the Russia-Ukraine war.”

Weather has also lifted Paris corn futures, which gained as much as 2.9% on Friday. Europe’s corn harvest is expected to be the smallest in nearly two decades because of the heat, while the latest data released on Friday showed a further deterioration in French crop conditions.

The Bloomberg Agriculture Spot Index, which tracks prices of major agricultural commodities, reached its highest level since July 2023 on Wednesday. This increases the risk of higher food costs across a broad range of staple products, from bread and vegetable oils to meat and dairy products.

Tags: drought, war, corn, EU, prices, Black Sea region, wheat