Wheat and other agricultural commodities surged on the Chicago Board of Trade Tuesday as President Biden confirmed new sanctions against Russia late in the trading session.
Russia is the world’s fourth biggest producer of wheat, if the European Union is counted as a single producer, and a blockade of Ukraine could jeopardize large amounts of exports from Black Sea ports.
Any disruption could lead to soaring prices for bread – especially in the Middle East, where Turkey, Egypt and Lebanon rely on Russia and Ukraine for much of their wheat needs – at a time when inflation is already rippling through the global economy.
Wheat (W_1:COM) for May delivery ended +6% to $8.52 1/2 per bushel on the CBOT, while March corn (C_1:COM) closed +3.1% to $6.74 3/4 a bushel and March soybeans (S_1:COM) settled +2.1% to $16.35/bushel, which climbed as high as $16.46, the highest since May.
ETFs: WEAT, CORN, SOYB
“As much as 15M tons of wheat exports from the Black Sea region could be at risk,” Commerzbank analysts said. “Such a large amount could hardly be sourced elsewhere and would lead to a significant reduction of stocks in the other export countries.”
Corn futures were aided by strength in crude oil prices, which rose in response to rising hostilities at the Russia-Ukraine border; the movement of oil prices affects margins for ethanol producers, which in turn affects the consumption of corn by refineries in the U.S.
Meanwhile, soybean futures rose for a fourth straight session, as dry weather in South America continues to hurt production.