Grain Snippet: Wheat Falls Despite Black Sea Tensions
The Black Sea conflict remained the key driver of the global wheat market throughout July. However, ongoing attacks on grain export vessels and infrastructure failed to prevent wheat futures from declining over the second half of the month. Since 24 July, December 2026 CBOT Soft Red Winter wheat futures have fallen by 38 USc/bu, while December 2026 Euronext Milling wheat futures have declined by €16/MT.
The main driver behind the decline was renewed optimism surrounding Russia-Ukraine diplomatic efforts. Reports of renewed efforts to revive peace talks emerged on 24 July, reducing part of the geopolitical risk premium previously built into wheat prices. On 28 July, the US and Ukrainian presidents met to discuss advancing those efforts. While no concrete outcomes emerged, the renewed dialogue encouraged the market to reassess the likelihood of prolonged disruptions to Black Sea grain exports.
However, Black Sea risks have not disappeared. Military attacks continued despite the renewed peace efforts. On 30 July, Ukrainian drones reportedly damaged Russia’s Port of Taman, a major grain export terminal with an annual handling capacity of around 5 MMT. Reports on 4 August also indicated further attacks on vessels and port infrastructure in both Ukrainian and Russian Black Sea ports. As the Black Sea and Sea of Azov remain critical grain export corridors, continued disruptions could constrain export flows and reduce grain availability to the international market.
Another factor contributing to weaker wheat futures was easing concerns surrounding the US-Iran conflict and its implications for the Strait of Hormuz, one of the world’s main seaborne oil and fertiliser transport corridors. At the time of writing, vessel traffic through the strait remained restricted. However, recent reports suggested significant progress, with Iran and Oman reportedly close to an agreement to fully reopen the Strait of Hormuz, although negotiations remained ongoing and the situation continued to evolve. As concerns over the Strait of Hormuz eased, crude oil prices fell by around US$5/barrel on 4 August, contributing to weaker sentiment across global cereal and oilseed markets.
Northern Hemisphere crop conditions also weighed on market sentiment. Over the past two weeks, US corn crop ratings declined from 67% to 61% good-to-excellent following earlier dry weather, slipping below both last year’s 73% and the five-year average of 63%. However, recent rainfall improved US corn yield prospects, easing weather concerns across the broader grain complex and continuing to weigh on wheat prices. Meanwhile, Canadian spring wheat crop conditions remain favourable, reinforcing expectations for an average-to-above-average spring wheat crop.
Locally, El Niño remains a key production risk heading into August and September, increasing the likelihood of warmer, drier conditions and frost across Australian cropping regions. Nevertheless, forecast rainfall across South Australian and Victorian wheat-growing regions in early August is expected to further improve the already favourable production outlook.
This is a sample only, if you would like to view the entire document and our recommendations, please contact CloudBreak to discuss becoming a member on (08) 8388 8084.