LONDON, ENGLAND – The crisis between Russia and Ukraine has overshadowed the wheat market since the start of 2022, with many global buyers and sellers reacting to uncertainty with a wait-and-see attitude. The market is supported by tightness in old crop supplies.

Marc Zribi, head of unit for grains and sugar at the French agrifood industry body FranceAgriMer, told journalists at a Feb. 16 press briefing on the markets that the price of fuel has jumped to historic highs, while freight costs had swung higher. He also noted volatility in the currency of both Russia, despite its high gold reserves, and Ukraine.

The French expert also noted that the price of farm inputs, notably fertilizer, has risen sharply, with a correlation with the price of natural gas.

European Union Agriculture Commissioner Janusz Wojciechowski told a meeting of the block’s farm ministers on Feb. 21 that “we see this issue affecting the markets and farmers’ incomes, driven by a more general energy price increase.”

He put the rise in fertilizer prices at 142% over the past year.

“With higher input costs, farmers’ rational decisions are likely to result in less fertilizers used, potentially resulting in lower yields,” he said.

Zribi also focused on the extreme uncertainty of the situation between Russia and Ukraine, pointing out that exporters were moving everything they could out of the region, with both countries accelerating the export program. The two countries are responsible for 30% of the world’s exports of wheat and barley, he reminded meeting participants. The ports used for grain exports by Ukraine, in particular, were at risk from conflict.

FranceAgriMer’s British counterpart, the Agriculture and Horticulture Development Board, reported on Jan. 21 that wheat prices had fluctuated during the previous week because of the Black Sea situation, but ended higher.

“Exports from the region are continuing but disruption remains a risk,” it said. AHDB described Russia and French winter wheat crops as looking good, but also explained that parts of the United States remain dry.

“In Texas, crops are reaching ear emergence and so are more sensitive to adverse weather,” the board said.

In its Grain Market Report of Feb. 17, the International Grains Council (IGC) reported that its index of wheat prices, which bottomed out at a three-month low in mid-January, firmed to 2% up on its level of a month earlier.

“However, movements were two-sided, with heavy influence from external markets adding to elevated volatility at times,” the IGC noted. “Net changes in major exporters’ prices were also mixed, as declines in the EU and the Black Sea region contrasted with increases at most other origins, notably in Canada.

“Markets posted solid gains in the latter half of January, when building worries about potentially escalating Black Sea tensions fueled fears about market availabilities, while robust buying interest, notably from importers in Asia, provided background support. Prices continued to respond to geopolitical developments in the period since, with occasional pressure from profit taking, albeit with rallying row crop prices offering support in recent weeks, along with talk about unfavorably dry weather for 2022-23 winter crops in some Northern Hemisphere producers.”

In its Food Price Index, which was published on Feb. 3, the United Nations Food and Agriculture Organization reported a 3.1% fall in world wheat prices in January, “with increased seasonal supplies from large harvests in Australia and Argentina.”

“However, support from continued strong demand amidst tight global availability of higher-quality wheat along with uncertainty over exportable supplies, prevented prices from declining further,” the FAO said.