Hopes that the Russia-Ukraine War could end permanently brought a decline in wheat prices. Russian President Vladimir Putin's statement that an agreement must be reached between Russia and Ukraine and that there was an opportunity to achieve this triggered a sharp retreat in the market.
Putin said the issue ultimately had to be resolved between the parties to the conflict. Assessments of the prospects for peace strengthened expectations that Russia and Ukraine could see relief in grain exports.
Wheat prices fall 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.
Futures and commodities market specialist Zafer Ergezen said wheat prices had recently experienced a significant recovery. Ergezen said the increase was driven by attacks in the Black Sea and rising geopolitical risks, as well as the war between the United States and Israel and Iran, higher transportation costs, and increases in fuel and fertilizer prices.
Black Sea trade is decisive for global supply
Ergezen noted that Russia and Ukraine account for approximately 30 percent of global wheat trade. He emphasized that developments in the Black Sea were important for global wheat supplies.
The launch of the grain corridor established through Türkiye's efforts reduced supply pressure in the wheat market. However, renewed attacks and rising tensions in the Black Sea caused prices to move higher.
Weather conditions and cost pressures persist
Ergezen said weather conditions were a significant risk for the supply outlook and that the effects of El Niño had brought warmer and drier weather. He said this had increased concerns about declining yields and noted that the effects of El Niño were expected to continue until early 2027.
Ergezen attributed the decline seen this week to a reduction in geopolitical risks rather than demand dynamics. He said stronger expectations that grain trade would continue in the Black Sea had increased profit-taking in the market.
I view the recent pullback as profit-taking. However, risks remain in the overall picture.
Ergezen said overall production costs, particularly energy and fertilizer prices, continued to rise, increasing wheat production costs. He said persistently high oil prices were keeping fertilizer, transportation and insurance costs elevated, creating pressure on agricultural commodities.
According to Ergezen, a reduction in risks in the Black Sea could put downward pressure on wheat prices in the short term. However, wheat prices are expected to remain strong in the coming period because cost pressures and weather-related supply risks persist across global agricultural commodities.
