Political tension between Russia and Ukraine are continuing to cause volatility in global grain markets, says the Agriculture and Horticulture Development Board.
Global wheat prices rose again in mid-January fuelled by increasing tension between the two countries as Russian president Vladimir Putin moved more than 100,000 troops towards the Ukraine border.
“Political and economic events often have more impact on grain prices in our winter,” said AHDB senior analyst Helen Plant. “This is because there’s less news about grain supply. But the tensions matter as both Russia and Ukraine are major wheat exporters.”
Political tensions in the Black Sea are a big part of why wheat prices have bounced during recent weeks. The latest news relates to comments by the US Secretary of State about the number of Russian troops near Ukraine’s border.
Old crop (May-22) UK feed wheat futures gained £5.50/t to £219.00/t, while new crop (Nov-22) prices rose £4.10/t to £198.00/t. Ms Plant said further escalation of the tensions could disrupt grain exports from the region.
“It could also push up natural gas and/or crude oil prices. In turn, higher natural gas prices could push up nitrogen fertiliser prices, which are already very high.
“Meanwhile, higher crude oil prices can make it more attractive to use more biofuels, such as those made from wheat or maize. More demand for biofuels increases demand for the grains and vegetable oils they’re made from.”
Political tension has caused price spikes before. In early 2014, wheat and crude oil prices rose sharply as Russia annexed the Crimea. Nearby UK feed wheat futures rose over £13/t (+9%) between 19 February and late March.
This season, global wheat supplies are so tight that any export disruption from the region could have a serious impact. The USDA forecasts that wheat stocks held by major exporting countries is the lowest since 2007/08.