Wheat futures are surging midday Wednesday as traders react to a sharp escalation in the Russia-Ukraine conflict and concerns about disruptions to one of the world’s largest grain-exporting regions.
Mike Castle with StoneX Financial says Ukraine’s growing ability to strike Russian shipping vessels has changed the market outlook, with more than 100 vessels hit in the Sea of Azov in recent weeks, forcing Russia to close the Kerch Strait, a key route for wheat exports.
“What we’re seeing in this escalation is kind of novel. This is kind of new. You have seen a dramatic increase in Ukraine’s ability to strike Russian vessels.”
Castle says the latest escalation into the Black Sea itself is raising concerns about Russia’s ability to move wheat to global buyers.
“We know there is right now kind of a material impact to Russia’s ability to ship up front. How do they respond to that?”
He says the situation comes at a time when global wheat supplies are already tighter, with a smaller U.S. crop and weather concerns reducing production potential in Europe.
“If you do see this escalation continue, you’re talking about a tighter market here up front and obviously wheat is the big driver here today.”
Castle says corn and edible oils are also markets to watch as the conflict develops because of broader commodity connections.