Wheat futures rally as Russia-Ukraine tensions intensify, export prices volatile

Wheat futures prices rallied sharply Feb. 24 after Russia ordered military operations in Ukraine over concerns regarding a decline in supply from the Black Sea region.

Russia and Ukraine's combined wheat exports for the 2021-22 marketing year (June-July) are estimated to account for 23% of the global total of 206.9 million mt, according to the US Department of Agriculture.

Russia and Ukraine are key suppliers of wheat to the Middle East and European nations.

Russia had deployed troops into breakaway sections of eastern Ukraine earlier in the week on a "peacekeeping mission" after recognizing the territories as independent.

The rising tensions in the region, a major wheat exporter, has created volatility in global wheat markets and concerns have emerged over likely disruption to trade flows, traders added

As of 0456 GMT Feb. 24, Chicago Soft Red Winter wheat futures May contract prices on Chicago Board of Trade rose 48 cents from the previous settlement to $9.32/ bushel. Similarly, May futures contract of hard red winter wheat rallied to $9.68/bu, nearly 50 cents higher from the previous settlement.

Wheat futures prices on Minneapolis Grain Exchange also increased sharply on news of the military operations in Ukraine. The March contract of hard red winter wheat has gained 49 cents to $9.63/bu, while the same month wheat contract rose increased to $9.24/bu, up 49 cents from the previous close.

Futures prices of wheat in Europe had also increased sharply on Feb. 23. The March futures contract of wheat on Euronext settled at Eur287/mt on Feb. 23, up Eur9 on the day.

Export prices remain volatile

Export prices of wheat from Russia and Ukraine remained volatile amid the rising tensions in the region.

According to S&P Global Platts assessments, FOB prices of 12.5% Russian wheat increased $1 on the day to settle at $313/mt on Feb. 23, while FOB prices of Ukraine's 11.5% wheat remained steady day on day at $309/mt.

With the tensions escalating in the region, traders believe that the prices of wheat from Ukraine are seen to remain weak in the coming weeks. For Russia, too, prices are likely to remain volatile during the next few weeks as buyers were uncertain about the trade prospects in the region, they added.

Wheat traders said that the uncertainty over the region is expected to prevail over the next few weeks with the tensions escalating.

There are also possibilities that demand for Black Sea wheat is likely to move toward EU and other alternative origins, such as Argentina and Australia, a Kyiv-based trader added.