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How the wheat market was turned upside down

The price of wheat has fallen from its peak after Russia invaded Ukraine, but experts say one of the world’s most consumed foods remains in short supply and warn a global hunger crisis is looming. still profile.

Like oil, steel, beef and other raw materials integral to the economy, the price and availability of wheat evolves in response to a complex set of overlapping factors, such as geopolitics and weather report. Although the lower wheat price offers some relief to countries that depend on importing the crop, it may deter farmers from planting more. The drop in prices also does not solve pre-existing problems made worse by a war between two of the world’s largest producers. Energy prices remain high, affecting the cost of operating farm equipment and transporting wheat to market, as well as the cost of fertilizers. And hot, dry weather that reduces crop yields is becoming more common.

“The fundamental situation hasn’t really changed,” said Ehsan Khoman, who manages emerging markets and commodities research for Mitsubishi UFJ Financial Group, a Japanese bank. “There is a potential where food prices could spin out of control.”

The wheat market has boomed this year.

Russia’s invasion of Ukraine has caused food and fuel prices to soar, as war and sanctions have cut off supplies to two of the world’s leading agricultural and energy exporters. The two countries together account for about a quarter of global wheat exports, according to the US Department of Agriculture.

Oil prices have fallen a little since the beginning of the war, even if it still costs much more than at the beginning of the year for Americans to fill up with gasoline, for Europeans to heat their homes with gas natural and for just anyone anywhere to do anything related to the cost of oil. Wheat prices, however, fell back to about where they started the year.

The price of a widely traded type of wheat that started the year at around $7.70 a bushel jumped to $13 in the aftermath of Russia’s invasion of Ukraine in late February, futures show. traded in Chicago, a global hub for the commodity. The price generally remained in the double digits until mid-June when it began to decline. On Friday, wheat was trading at just over $8 a bushel.

After the initial shock of the invasion, rising prices deterred some countries from buying wheat, lowering demand and weighing on prices. A slight increase in supply from the winter wheat harvest has also pushed prices down in recent weeks.

An agreement to release the trapped grain brings only partial relief.

Progress in negotiations over the fate of more than 20 million metric tons of grain stranded in Ukraine’s Black Sea ports was one of the main factors pushing down wheat prices. Just over a week ago, a deal was struck to open an export corridor to allow some of the war-trapped grain to move around the world.

The deal may not hold amid the fighting, and even if it does, experts say it is unlikely to be enough to address other issues plaguing the global wheat market.

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