Geopolitical conflicts and severe weather push wheat futures close to a three-year high.

Geopolitical conflicts continue to escalate alongside worsening weather in key production areas in Europe and the US, further intensifying market concerns about tightening global supply. International grain prices continue to approach three-year highs.

According to Bloomberg’s report on Friday, the most active wheat futures in Chicago rose again, increasing by up to 0.8% during trading. The previous trading day saw wheat futures surge 4.1%, nearing three-year highs, before briefly retreating due to some traders taking profits. So far this month, wheat prices have risen about 19%. The Russia-Ukraine conflict and escalating tensions in the Middle East are the main driving forces behind this round of price increases.

Meanwhile, the Bloomberg Agriculture Spot Index rose on Wednesday to its highest level since July 2023, indicating an overall strengthening in global agricultural product prices, further increasing upward pressure on costs for food such as bread, cooking oil, meat, and dairy products.

The situation in the Middle East also continues to disrupt market sentiment. According to CCTV News, US President Trump said on the 23rd that he is “seriously considering” resuming large-scale military operations against Iran. In addition, Trump stated that if Yemen’s Houthi forces attack Saudi ships again, the US will hold Iran responsible and impose “significant military punishment” on both Iran and the Houthis. On the same day, Israeli Defense Minister Katz said preparations had been made to deal with the situation with Iran.

Escalating warfare disrupts grain exports, supply risks rise further

Tensions in two strategic shipping lanes—the Black Sea and Red Sea—are continuously impacting global grain trade, further increasing market worries about wheat export supply.

According to Xinhua News Agency, Yemen’s Houthi forces announced in the early hours of the 23rd local time they had attacked two Saudi oil tankers in the Red Sea, claiming the tankers violated their recently announced maritime blockade. Meanwhile, according to CCTV News, Ukrainian President Zelensky stated on the 19th that Ukrainian forces had carried out long-range strikes on targets within Russia that day. Zelensky also said Ukrainian forces had accurately struck three Russian oil tankers in the Black Sea.

Futures International LLC said in a Thursday report, restrictions on Russian shipping, continued attacks on port infrastructure, and forced adjustments to grain export routes have further increased uncertainty in global wheat export supply. CRM AgriCommodities also noted that the recent movement in the wheat market again reflects the huge impact that geopolitical factors have on agricultural product prices. Especially given already tight fundamentals, the risks of war are further magnifying upward momentum in the market.

Worsening weather and reduced output expectations in Europe and US raise food inflation pressure

Aside from geopolitical risks, worsening weather in major production areas further reinforces market expectations of tightening supply.

France and Germany have recently been hit by prolonged high temperatures, impacting wheat yield prospects. Total EU grain output this year is expected to fall by more than 9% year-on-year, marking the biggest decline in over two decades. Meanwhile, North Dakota, the main US spring wheat producing region, is experiencing sustained high temperatures, putting increasing pressure on crop growth and ultimately threatening yields.

Supply concerns continue to grow and are starting to be passed on to food prices. The Bloomberg Agriculture Spot Index, which tracks prices of 10 major global agricultural products, rose to its highest level since July 2023 on Wednesday, indicating that the costs of agricultural products like grain and oil continue to climb, and prices for food like bread, cooking oil, meat, and dairy may face further upward pressure. Food inflation risks are rising.

Risk Warning and DisclaimerThe market involves risks, and investment should be made cautiously. This article does not constitute personal investment advice and does not take into account individual users’ specific investment objectives, financial situation or needs. Users should consider whether any opinions, views, or conclusions in this article are suitable for their particular circumstances. Investment based on this is at your own risk.