Chicago wheat settled at the highest price on record as Russia’s intensifying war in Ukraine cuts off supplies from one of the world’s leading breadbaskets.
Benchmark futures climbed by the exchange limit 85 cents, or 7%, to close at $12.94 a bushel. That builds on a massive surge of 41% last week, the biggest gain in data spanning six decades, and puts prices at their highest since 2008. The Paris contract for wheat breached an all-time high after jumping as much as 11%.
Wheat is a major food staple and surging prices will pile pressure on government budgets and add to global hunger. Prices have reached levels that were last seen about 14 years ago amid the global food-price crisis, surpassing highs that helped contribute to the Arab Spring a decade ago. Meanwhile, U.S. farmers are worried about drought and China is facing historically bad crop conditions.
“Talk that the wheat crop is China is not good is new, and supportive for prices,” Naomi Blohm, senior market adviser at Total Farm Marketing in West Bend, Wisconsin, said in a note.
Ukraine and Russia together account for more than a quarter of global trade of wheat, used in bread and noodles to livestock feed. The conflict has closed major ports in Ukraine, and severed logistics and transport links. Trade with Russia has also been stifled by the complexity of navigating sanctions and soaring insurance and freight costs.
“The escalation of the conflict is now putting markets into serious turmoil,” the Agricultural Market Information System said Monday in a report. “Any serious disruption of production and exports from these suppliers will no doubt drive up prices further and erode food security for millions of people.”
Commodities from energy to metals and agriculture have surged since Russia’s invasion, fueling inflationary pressure worldwide and posing new challenges for monetary policy. The enormous gains for wheat pushed CME Group Inc. to increase its trading limits for the crop.
Food costs have already risen to an all-time peak, according to the United Nations, and are set to go even higher, deepening woes of importers.
Unsubsidized bread prices are creeping higher in Egypt, the world’s top wheat importer. The government has been considering lifting the costs of subsidized loaves that millions of citizens consume.
The invasion will also deter Ukrainian spring planting of crops like corn and sunflower that would typically begin soon and may hamper winter-grain yields, extending the supply shock on the global market.
Traders will be watching crop reports due this week from both the U.S. and Brazil for any comment about the impact of Russia’s attack on Ukraine on crops.
U.S. Department of Agriculture’s Chief Economist Seth Meyer told Bloomberg on Monday that the agency would consider “all relevant factors impacting agricultural markets” in its updated estimates due Wednesday.
