Disruption to Black Sea grain exports drives wheat futures up; Russia plans to equip grain ships with heavy machine guns
Wheat futures rose for a second straight session as escalating attacks between Russia and Ukraine threaten supply prospects for the world's two largest wheat exporters. The conflict is increasingly affecting Black Sea shipping. Consulting agency SovEcon lowered its forecast for Russian wheat exports this year by about 4%, citing shipping restrictions in the Sea of Azov, which connects the Black Sea waters. Media reported this week that Russian officials have proposed equipping grain ships in the Sea of Azov with everything from armor plating and anti-drone netting to heavy machine guns and mobile missile launchers in response to Ukrainian drone attacks. At the same time, Ukrainian ships, ports and other Black Sea infrastructure were once again attacked by Russia. A Ukrainian agricultural organization has warned that the agricultural sector may face a new wave of bankruptcies if the government cannot solve the problem of blocked seaborne exports. As the harvest season in the Black Sea region reaches its peak, transport disruptions could slow down shipments during the peak export season and prompt importing countries to turn to other sources of supply. On Wednesday, Chicago's most actively traded wheat contract rose as much as 1.5%. Rabobank analyst Carlos Mera and others said in a report that these disruptions are expected to result in "millions of tons" of reduced grain exports from the Black Sea region between July and September. Recent market concerns have pushed Chicago wheat futures to their highest level in two years. Although they have since fallen back, wheat prices are still expected to rise 14% this month, the largest monthly increase since the Russian-Ukrainian war broke out in early 2022.