Geopolitics Sends Wheat Prices Soaring

Record wheat prices are causing anxiety in Europe due to geopolitical tensions and the ongoing blockade in the Strait of Hormuz. The price of wheat forecast for December on Euronext exceeded €255, a high not seen in years. This is not a result of recent droughts but rather the increasing geopolitical tensions.

The main export routes for grains from Ukraine and Russia have been damaged due to attacks on energy and port infrastructure, leading to a near-halt in exports. These two countries account for 27% of global grain exports, with a combined total of just over 65 million tonnes in 2024-25. The usual prime months for grain exports from the region are August and September, but this year's exports have at least halved.

Ukraine shipped only 590,000 tonnes in August, less than a third of its usual total. Russia normally exports five million tonnes in August, but this year it managed only three million. The damage to port infrastructure and export routes prevents ships from leaving, even though the new harvest is in and storage is full.

Wheat traders are turning to alternative supplies in Europe, with France benefiting from the situation as the largest supplier of wheat in the EU. French wheat can still cope with the increase in demand despite recent droughts, but higher prices also feed into inflation. The latest annualised inflation rate for the euro area was 3.3% in August.

The problem is set to stay for some time, with price movements now tracking announcements from Russian, Ukrainian, or Turkish officials. French wheat is becoming competitive again after very low prices and rising production costs over the past two years.