Wheat Swings After Touching an All-Time High on Supply Shocks
Prices in Chicago earlier leaped to a record $13.635 a bushel before plunging as much as 7.1%.
(Bloomberg) -- Wheat futures swung wildly between gains and losses Tuesday after climbing to unprecedented heights as Russia’s attack on Ukraine disrupts global food supplies.
Prices in Chicago earlier leaped to a record $13.635 a bushel before plunging as much as 7.1%. The world is facing a huge supply shock as the war cuts off shipments from a region that accounts for a quarter of the grain’s trade. Futures have climbed by the exchange limit for the past six days.
“Traders are taking their profits, but a turn back to the upside would not be a surprise,” CHS Hedging analyst Kevin Stockard said in a blog post.
The last time the staple grain was near these levels was during a 2008 food crisis that sparked political unrest worldwide. Rapeseed futures in Paris topped 900 euros ($980) a ton for the first time ever, and canola futures also reached a fresh record. Corn has risen by more than a quarter this year.
From fields to processing plants, the Russian invasion has disrupted Ukraine’s farming industry. Ports have been shuttered since war erupted, and although its rail system is trying to compensate, it would be difficult to make up for the lost seaborne trade.
Some Russian wheat is also flowing by land, while vessel transit is at a similar standstill due to the military action in the Black Sea. Trade in Russian commodities has also been stifled by the complexity of navigating sanctions and financial measures against the nation.
Ukrainian agribusiness Kernel Holding SA invoked force majeure on export contracts, it said Tuesday. Planting and fieldwork is also threatened with seeds, fuel and fertilizer in tight supply and some farmers away fighting just weeks before spring activity normally begins.
Russia and Ukraine combined had about 14 million tons of wheat and 18.5 million tons of corn left to ship this season, about 7% of total global grains trade, according to the United Nations.
In another signal that the turmoil is altering global grain flows, the Philippines made its biggest order of U.S. wheat since 2020.
Benchmark wheat futures fell 4.1% to $12.4125 a bushel as of 9:58 a.m. Chicago time. That remains nearly double the cost at this time last year.
Hard red winter wheat futures tumbled as much as 8.1%. Corn futures for May delivery fluctuated and the most-active soybean contract gained as much as 2.4% after the U.S. Department of Agriculture announced sales of 132,000 tons of the oilseed to China.
“There is going to be a point here at which this squeeze ends, the price can’t keep going up and up forever,” said Tobin Gorey, agricultural strategist with Commonwealth Bank of Australia. Still, “the issues that drove prices up to very high levels, which would include prices a buck or so below this, are still there and probably not going away very quickly.”
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