Wheat Prices Surge as Black Sea Supply Crunch Squeezes Global Buyers

Global wheat buyers who held back from restocking are now confronting sharply higher costs, as the war between Russia and Ukraine continues to choke off supplies from the Black Sea region. Attacks on vessels and port infrastructure have brought cargo movements to a near standstill since July, pushing benchmark Chicago futures up about 40% from June lows to a three-and-a-half-year high.

Importers across Asia, the Middle East and Africa had delayed alternative purchases in the hope of a deal allowing grain shipments to resume. With local stocks now running thin, competition for cargoes is expected to intensify until the Southern Hemisphere harvest begins later this year. "The Black Sea is an important region for shipping grains, and if buyers are not able to get grain out of this region, they have to look elsewhere for supplies, which is going to drive prices up further," said Ole Hansen, head of commodity strategy at Saxo Bank.

Russian wheat exports are on track to fall to around 1 million tons in September from 5 million tons a year earlier, while Ukraine is expected to ship about 1 million tons this month, half of last September's volume. Asia is likely to bear the brunt in the near term. "There are very few ships going in to load and whatever little is being exported out of Russia and Ukraine is going to some buyers in the Middle East and Africa. Nothing is heading to Asia," said Ishan Bhanu, an agricultural analyst at commodities data firm Kpler.

Indonesia, the world's second-largest importer, received only about 60,000 tons from the Black Sea this month, down from half a million tons last September. Indonesian millers are turning to Argentina and paying around 20% to 25% more for Australian wheat than they previously paid for Black Sea cargoes. Some are booking container shipments from Australia to bridge immediate shortages, though high costs are deterring bulk purchases. "Prices have risen quite a bit and we are not in a position to pass on the entire cost to our flour buyers," said a senior executive at a Southeast Asian milling company.

Black Sea wheat from Romania is quoted around $340 per ton C&F to Southeast Asia, while Australian Premium White wheat is around $345 per ton for October shipment — roughly 25% higher than Black Sea wheat traded before the shipping crisis.

Egypt, the top global buyer, is scheduled to receive less than a tenth of the volume it got from Russia and Ukraine in the September-October period last year. Its wheat imports fell to 143,870 tons in the first half of September, from 876,139 tons a year earlier. Supply Minister Sherif Farouk said on Sunday that Egypt is diversifying toward France and other European suppliers. Still, many mills are operating at just 30% of capacity as they wait for prices that could drop by as much as a fifth if Black Sea shipping is restored. "They are all waiting to see Russia and Ukraine sit down. The market is paranoid that if this happens then the market will suddenly go down $50 or $60 per ton," said Hesham Soliman, an Alexandria-based trader.