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Renewed hostilities in the Middle East between the U.S. and Iran dominated headlines this week as oil futures jumped in response to a near-standstill in traffic through the Strait of Hormuz. But it’s the ongoing Russia-Ukraine war that’s likely had a bigger impact on markets – at least agricultural markets – this week.
Wheat futures and soybean oil were both lifted after intensifying attacks on Russian energy infrastructure and shipping by Ukraine. Damage to Russian refineries prompted Moscow earlier this week to announce a ban on diesel exports, sending prices of the fuel soaring worldwide. Russia is typically the world’s second-largest diesel exporter.The ban comes amid already tight supplies and peak summer demand. Futures on heating oil – an equivalent proxy for diesel – soared over 11% this week in New York, lending support to soybean oil futures, with theAugust contract up 5.5% for the week.
- Wheat, meanwhile, rallied sharply on Thursday and Friday on concerns the hostilities could crimp Russian wheat exports. Late Friday, Reuters reported that Russia had in fact temporarily halted shipping through the Don-Azov Channel, a navigable waterway that links the Don River with the Sea of Azov. The report said the move came after a Ukrainian attack on the Sea of Azov Friday, including 10 tankers.
September SRW wheat rallied 20 1/2 cents to $6.40 ¼ on Friday, hitting a six-week high and posting a weekly gain of 40 1/2 cents. September HRW wheat rose 22 cents to $6.76 1/4, also hitting a six-week high and rising 37 ¾ cents for the week.
WASDE highlights: The July World Agricultural Supply and Demand Estimates (WASDE) released Friday were largely friendly to grain and soybean futures. USDA’s first all-wheat production forecast predicted the smallest crop in over 50 years but came in slightly above forecasts, buoyed somewhat by spring wheat production. USDA pegged new crop corn ending stocks at 1.790 billion bu., well below the average pre-report estimate of 1.873 billion bu. World ending stocks for corn, soybeans and wheat also landed below expectations.
Europe’s heatwave toll: USDA in the WASDE report cut its forecast for European Union corn production by 3.7 million metric tons to 53.78 MMT, reflecting damage to the crop from a brutal heatwave that’s seen taking a particular toll on French production. Grain trade association Coceral cut its outlook for European Union maize production on Friday by almost 8% to 52.7 million metric tons, the lowest since 2007, Reuters reported. That followed a 7% cut in the production forecast by commodity data firm Expana, with both forecasters citing weather damage in France and also Hungary, the report said. Data from France AgriMer on Friday showed a further drop in French crop conditions to the lowest in at least 15 years.
Western Europe will get away from some of the heat and absolute dryness during the coming week to 10 days but below normal rainfall will continue to be a concern, said World Weather Inc. in a Friday note. The forecaster said no dramatic improvement in crop or field conditions will result without a generalized rain of significance, which remains unlikely.
Unexpected biofuel-import surge: More than 13 million gallons of biodiesel from Europe has arrived in the U.S. since the beginning of May, including 3.4 million gallons of Dutch supply in just the last week, Bloomberg reported. The imports represent the first biodiesel shipments to enter the U.S. from Europe since December 2024, according to bills of lading and Energy Information Administration data. It’s a surprising phenomenon, the report notes, because the US is already the world’s largest biofuels producer, and Europe’s own fuel markets remain heavily strained because of the Iran war. However, the imports are coming after the US finalized record-high biofuel blend mandates in March.
- The aggressive quotas “caught both the agriculture and oil industries off guard, and they are now struggling to bring enough biofuel to market after plant closures in recent years,” the report said. “That’s created opportunities for foreign producers, while at the same time imposing costs on the mostly domestic oil refineries charged under the program with bringing biofuels to market.”
Bird flu outbreaks: The Philippines has reported an outbreak of highly pathogenic H5N1 bird flu among backyard birds in its Oriental Mindoro province, the World Organization for Animal Health (WOAH) said on Friday, according to Reuters. The report noted that the spread of avian influenza, commonly called bird flu, has raised concerns among governments and the poultry industry after it ravaged flocks around the world in recent years, disrupting supply, fuelling higher food prices and raising the risk of human transmission.
Separately, Australia on Friday said scientists had detected the H5 bird flu in an Australian seabird for the first time. Agence France Presse said Australia for years had been the only continental landmass free of the H5 strain, which has caused severe disease and high death rates in poultry and wild birds worldwide. The report noted a total of 12 cases of H5 bird flu have been confirmed in Australia since last month but all were in migratory sea birds, not local wildlife. A lab test confirmed the disease had infected a greater crested tern in Robe, South Australia.
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