Dive Brief:
- Global wheat prices rose for the first time in nine months after Russia pulled out of a wartime agreement to ship grain from Ukraine to the rest of the world, the United Nations' Food and Agriculture Organization said Friday.
- International wheat prices rose 1.6% in July, according to the FAO's Cereal Price Index. Food prices overall were up 1.3% from June.
- Russia exited the Black Sea Grain Initiative on July 17. The country has since doubled down on efforts to block grain shipments from leaving Ukraine, attacking port infrastructure around the Black Sea and along the Danube River.
Dive Insight:
The intensifying conflict between Russia and Ukraine adds to the uncertainty around global wheat supply, which has already been pressured by drier conditions in the U.S. and Canada.
Russia and Ukraine are both in the middle of bumper harvests, but attacks on port infrastructure in both countries have made it harder and more expensive to move grain. A drone strike over the weekend on Russia's Novorossiysk base, which is next to a major grain shipping hub, sent wheat futures climbing more than 3% on Monday.
Meanwhile, attacks on ports in the Black Sea and the Danube River have destroyed tens of thousands of tons of grain and left Ukraine's farmers with little option to export their goods. Ukraine has been in talks with Croatia potentially to use their ports, Reuters reported.
U.S. Secretary of State Anthony Blinken said following a U.N. Security Council meeting last week that countries are “looking at every option to maximize the export of grains from Ukraine, including by land routes.”
However, alternate transport options are unlikely to make up for exports under the Black Sea Grain Initiative, which allowed for the shipment of over 30 million tons of grain.
“Even if, for example, there was an effective and safe way to move things by sea from the south, the fact that Russia is targeting the ports, targeting the production facilities, the storage facilities, the grain itself – as long as that continues, it’s going to be incredibly difficult,” Blinken said.
