Wheat prices soar for a third day as Russia-Ukraine tensions stoke fears of major food crisis

Wheat prices rose on Thursday after Russia threatened to treat ships heading for Ukrainian ports as military cargo carriers, deepening fears of a global food security crisis.

It marks the third consecutive day of price rises. The most actively traded wheat contract on the Chicago Board of Trade was last seen trading around 1.4% higher at 737.6 cents per bushel, notching a three-week high.

It follows a jump of 8.5% in the previous session, the biggest daily gain in more than a year, on mounting geopolitical tensions. Wheat prices remain well below the peak levels of 1,177.5 cents per bushel reached in May of last year, however.

The rise follows the Kremlin’s decision Monday to pull out of the Black Sea Grain Initiative, a critically important wartime deal that provided a maritime humanitarian corridor for the export of Ukrainian grain.

U.N. chief António Guterres said he “deeply” regretted Russia’s decision to terminate the initiative, which in effect ended a “lifeline” for hundreds of millions across the globe facing hunger, as well as those already struggling with spiraling food costs.

European Union foreign policy chief Josep Borrell said Thursday that Russia’s decision to pull out of the pact would imperil global food security.

“What we already know is that this is going to create a big and huge food crisis in the world,” Borrell said Thursday ahead of an EU foreign minister’s meeting.

Russian forces have launched extensive missile and drone attacks against port and grain infrastructure in southern Ukraine in recent days.

The Institute for the Study of War, a U.S.-based think tank, said Wednesday that it believes the recent attacks were likely to reaffirm Russia’s objections to the renewal of the Black Sea grain deal and hinder Kyiv’s ability to export agricultural commodities.

Ukraine’s Agriculture Ministry said Wednesday that recent attacks on Ukraine’s southern port of Odesa and other cities had destroyed 60,000 tons of grain as well as crucial infrastructure.

Western and Ukrainian officials have accused Russia of essentially attacking all those who rely on Ukraine’s grain exports, and putting vulnerable people at risk. A large portion of Ukrainian grain and food products go to countries in Africa and the Middle East.

Ratcheting tensions up further, Moscow warned that from Thursday all vessels sailing toward Ukrainian ports would be deemed “to be involved in the Ukrainian conflict on the side of the Kyiv regime.”

Russian President Vladimir Putin has said the country will immediately reinstate the international grain deal if its demands are met. These include lifting restrictions that limit the full dispatch of its own grain and fertilizer exports, and an end to sanctions on the Russian Agricultural Bank.

Since it was signed in July last year, the U.N. estimated that the Black Sea Grain Initiative allowed more than 32 million metric tons of food commodities to be exported from three Ukrainian Black Sea ports — Odesa, Chornomorsk and Pivdennyi, previously known as Yuzhny — to 45 countries worldwide.

The U.N. said the deal had played an “indispensable role” in global food security, while analysts said it had supported price stability and prevented shortages across the developing world. Investors, however, had been bracing for the intiative to be axed.

“Ukraine will now be forced to export most of its grains and oilseeds through its land borders and Danube ports. This will significantly drive up transportation costs and pile further pressure on Ukrainian farmers’ profits,” Carlos Mera, head of agricultural commodities markets at Dutch lender Rabobank, said Monday.

“The knock-on effect of this is it could prompt them to plant less next season, placing further pressure on supplies going forward,” he added.

Ultimately, Mera said the development means low-income countries in Africa and the Middle East will likely become more dependent on Russian wheat — a country that represents more than 20% of global wheat exports.