The Unfortunate Reason Wheat Prices Are Decreasing

Unless you enjoy watching the gyrations of a volatile commodities market, you might not have noticed something traders have started to cautiously talk about: Wheat prices for "future delivery" — or wheat that will be delivered at a future, specified date, per The Economic Times — have begun to come off their highs. According to one Nasdaq chart, prices were north of $1,000 per metric ton in the middle of June, and as we head into July, the same chart shows wheat prices at $884 per metric ton. Prices were at their highest just after Russia invaded Ukraine in February, per Nasdaq.

While this news may be good for consumers, one reason wheat prices appear to be falling is that Russia, which is meant to be penalized for invading Ukraine, is moving grain, and plenty of it. According to The New York Times, the country even appears to be selling stolen Ukrainian grain at deep discounts. Data shows that despite sanctions, Russia has continued to sell grain to the Middle East and North Africa, with The Wall Street Journal noting that these figures "doubled in April and were up over 60% in May compared to a year earlier." The Journal also reported exports to Europe at near pre-invasion levels.

One economist who studies Black Sea grain markets offers an explanation for the current wheat situation: "The world needs Russian wheat and Russians need to sell that wheat," he told the Wall Street Journal. "It is just a matter of price."

The wholesale trading of stolen wheat is not the only reason why prices have been backsliding after spending weeks at record highs. Quartz credits talks between Russia and Turkey over the possible shipment of Ukrainian grain via the Black Sea as another reason.

Though climate change has previously harmed global wheat supplies, there's now news that the weather has been kind to wheat fields across the U.S., Europe, and Australia, which is raising hopes that current harvests will be enough to keep the world fed, per The Wall Street Journal. 

In response, the U.S. Department of Agriculture has significantly increased its "wheat production forecast," and Australia's Department of Agriculture, Water and the Environment is planning on a 3 million metric ton increase from the 2020-2021 harvesting season, which means as much as 36.3 million metric tons of wheat could be harvested there this year. Britain's Agriculture and Horticulture Development Board feels similarly hopeful, telling the WSJ that "Harvest pressure [on prices] is expected to continue as combines roll in the Northern Hemisphere."

While some analysts are warning consumers and producers not to be too optimistic, Jake Hanley, managing director at an agricultural investment firm, allowed himself to sound a positive note. "Wheat has broken down to levels not seen since the very beginning of the Russian invasion of Ukraine. That is in itself significant," he told Quartz.