Wheat costs are rising as tensions between Russia and Ukraine rise.

As tensions between Russia and Ukraine increased as a result of Moscow’s suspension of the Black Sea grain deal, wheat futures rose more than 8% on Wednesday to close at their highest level in three weeks.

According to Jack Scoville, vice president of The Price Futures Group and author of the Grains and Softs Report, Ukraine blasted the Russia-Crimea Bridge “to start this latest escalation off a couple of days ago,” Russia recently shelled the Ukrainian port of Odessa over the course of two days. “The war is intensifying, making it increasingly unlikely that Russia will participate in another Black Sea grain deal,”

According to the assessment released on Wednesday, “it is increasingly unlikely that any ship owner or ship insurer will take the chance on any passage of Ukrainian grain through the Black Sea, and perhaps not for Russia, either.” “Access to wheat from at least one country, and possibly both, has recently become much more limited.

Following Russia’s statement early this week that it was withdrawing from the Black Sea Grain Initiative, a pact mediated by the United Nations and Turkey in July of last year to help supply world markets with food and fertiliser, tensions between the two countries have risen. Since February 2022, when Russia invaded Ukraine, the two countries have been at war.

According to David Maloni, president of food service supply chain consulting company Datum FS, consulting firm UkrAgroConsult increased its estimates on Russian wheat exports in anticipation that the grain export dispute would not be resolved.

He thinks that the markets interpreted it “as a sign that things may be worse than thought just a couple of days ago” and that may be what caused the price increase on Wednesday.

The most actively traded September soft red winter wheat futures contract increased by 57 cents, or 8.5%, to settle at $7.27 3/4 a bushel in Chicago. According to Dow Jones Market Data, that represented the highest settlement since June 26 and the largest daily percentage increase since late February 28, 2022. December maize rose 18 cents to settle at $5.53 a bushel.

It’s astonishing how quickly things can change, said Darin Newsom, senior market analyst at Barchart. He said that the news on Monday that Russia had suspended the grain trade didn’t instantly cause a significant shift in market sentiment.

However, since then, Russia has been bombing important Ukrainian ports around the Black Sea, maybe in an effort to halt all imports, according to Newsom.

Fundamentally, he claimed, nothing has changed, at least not in light of the “carry” in Chicago futures spreads.

The price differential between contracts is known as “carry” in futures spreads, according to Newsom. By examining the market’s willingness to pay the carry (premium held by deferred contracts) of the total cost of storage and interest, we may determine how bullish or bearish these spreads are.

According to Bloomberg, on Wednesday, the Russian defence ministry issued a warning over the security of ships travelling to Ukrainian ports starting on Thursday. According to the statement, any new ships en route to Ukrainian ports will be suspected of carrying military supplies.

As of right now, there are no indications of rising demand for American wheat supply, according to Newsom, but we’ll have to wait and see if or when that changes.

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