Wheat futures surge after Russia strikes Ukrainian grain terminal

6 Jun 2022 | Mark Shenk

Global wheat markets surged on Monday after a Russian attack on silos at the Ukrainian port of Mykolaiv raised additional doubts about the likelihood that Russia will allow Ukrainian crop exports.    

"Traders are losing confidence Russia will live up to their expectations to allow Ukraine to export grain, after two warehouses with sunflower meal at Nikatera (Ukraine) were hit by a rocket over the weekend,"  Terry Reilly, senior grain and oilseed commodity analyst at Futures International, told Agricensus.

"That and thin volume, with many countries on holiday, is creating a wide trading range," Reilly added.

As of 1115 Eastern time, Chicago SRW futures were down 5-6% on the previous settlement, with July trading at $11.01/bu and September at $11.12/bu.

Chicago HRW futures were also down around 5% on last Friday’s settlement, with July at $11.78/bu and September at $11.84/bu.

"Part of the rally is because the nearby Chicago future had dropped $1.40 top to bottom in three sessions, and the market got oversold," said Charlie Sernatinger of ED&F Man.  

The Russian shelling of Mykolaiv is "putting the lie to the Russians about allowing grain to be exported out of Ukraine through the Black Sea – if you don’t have a loading terminal, you can’t load any ships," Sernatinger said. 

A national holiday in France, where drought has led to concerns about the size of the country's wheat crop, has reduced trading volume in Europe and added to the volatility analysts and brokers said.

"Today is a holiday in France, so the cooperatives are not making any statements on the damage, but commercials feel like it was substantial, pushing up Matif futures and US futures are responding," Sernatinger said.  

In Europe, the front-month September Euronext milling wheat futures contract approached the €400/mt mark, trading at €398.5/mt, up €20.25/mt, while December climbed by €19.50/mt to €392.75/mt. 

"Finally, there was a major hail storm over the center of France this weekend with tennis-ball-sized hail falling on wheat fields and vignobles, with bad damage suspected to the crop,"  Sernatinger said.