The escalation in the Black Sea reached a tipping point last week, with the major combatants targeting each other’s port facilities and merchant shipping. Then, late Friday night, a report emerged that the two sides were considering a deal whereby vessels carrying registered food and feed cargoes would be declared ‘off limits.’
That was enough to pour cold water on the wheat market, which had been pricing in the prospect of a prolonged supply squeeze. The CBOT Dec ’26 contract has shed 33c/bu — roughly $17/t — over the past couple of sessions.
The interesting part? No deal has been signed, no concessions have been made, and attacks involving port infrastructure and maritime traffic continue. Last night, the Port of Taman, which exports about 5mmt per year, was targeted by Ukrainian missiles, while Russian missiles hit more vessels in Ukrainian waters.
The other big-ticket news item that rocked global markets — coincidentally, on the same evening — was a reported pause in hostilities being negotiated between the US and Iran. Crude oil promptly fell from around US$94/barrel to roughly US$83/barrel, despite Iran seemingly missing the memo entirely.
The fall in crude inevitably weighed on the oilseed complex, with canola taking a similar hit. It is difficult to reconcile the size of the move with the reality on the ground. Hostilities in the Middle East remain elevated and, if anything, appear to be spreading, with vessels transiting the Red Sea now facing the risk of Houthi attacks.
But such is the power of words. When those words suggest the end of risk, the market can fold like a house of cards.
Geopolitics has always influenced grain pricing, but the current situation is producing faster and more frequent changes in risk premiums. Markets are becoming increasingly sensitive to headlines, and the speed at which those premiums can appear — and disappear — is remarkable.
Away from the headlines, the underlying risks haven’t disappeared. Europe is still dealing with significant weather concerns, with French corn now rated just 38% good to excellent, while US row crops are heading into a period of intense heat.
I can’t help but think the market is now looking oversold and there are still plenty of ups and downs to come.
More twists than a game of Snakes and Ladders
The escalation in the Black Sea reached a tipping point last week, with the major combatants targeting each other’s port facilities and merchant shipping. Then, late Friday night, a report emerged that the two sides were considering a deal whereby vessels carrying registered food and feed cargoes would be declared ‘off limits.’
That was enough to pour cold water on the wheat market, which had been pricing in the prospect of a prolonged supply squeeze. The CBOT Dec ’26 contract has shed 33c/bu — roughly $17/t — over the past couple of sessions.
The interesting part? No deal has been signed, no concessions have been made, and attacks involving port infrastructure and maritime traffic continue. Last night, the Port of Taman, which exports about 5mmt per year, was targeted by Ukrainian missiles, while Russian missiles hit more vessels in Ukrainian waters.
The other big-ticket news item that rocked global markets — coincidentally, on the same evening — was a reported pause in hostilities being negotiated between the US and Iran. Crude oil promptly fell from around US$94/barrel to roughly US$83/barrel, despite Iran seemingly missing the memo entirely.
The fall in crude inevitably weighed on the oilseed complex, with canola taking a similar hit. It is difficult to reconcile the size of the move with the reality on the ground. Hostilities in the Middle East remain elevated and, if anything, appear to be spreading, with vessels transiting the Red Sea now facing the risk of Houthi attacks.
But such is the power of words. When those words suggest the end of risk, the market can fold like a house of cards.
Geopolitics has always influenced grain pricing, but the current situation is producing faster and more frequent changes in risk premiums. Markets are becoming increasingly sensitive to headlines, and the speed at which those premiums can appear — and disappear — is remarkable.
Away from the headlines, the underlying risks haven’t disappeared. Europe is still dealing with significant weather concerns, with French corn now rated just 38% good to excellent, while US row crops are heading into a period of intense heat.
I can’t help but think the market is now looking oversold and there are still plenty of ups and downs to come.
Next week
The issue in the Black Sea remains intriguing. The longer this goes, the less tonnes can be exported. Which means nearby demand gets more desperate. At the moment, demand is relatively slow but there will come a point where importers will need to shore up reserves. If an area that supplies 30% of the world’s wheat remains offline for anything more than 2-3 months, it could become a major rallying point.
Have any questions or comments?
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Click on graph to expand
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Data sources: Next Level Grain Marketing, Reuters, BBC SovEcon, CRT Agri, Bloomberg, Mecardo
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Have any questions or comments?
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