Wheat prices continue to see excessive volatility
Updated at 1535748210
Photo Credit: Oregon DOT

Both hard wheat and soft wheat prices are experiencing a period of excessive volatility, according to the Food Security Portal’s Excessive Food Price Variability Early Warning System. Hard wheat futures prices on the Chicago Board of Trade began experiencing excessive volatility earlier in August, while soft wheat prices began to see excessive movement toward the end of the month. According to the Wall Street Journal, Chicago wheat futures reached a three-year high in early August. This surge was quickly followed by a decline in prices. The European market, which tends to loosely follow trends on the CBOT, has also seen day-to-day volatility in wheat future prices.

Driving this volatility are rumors of potential wheat export bans in Russia and the Ukraine. Both countries experienced rain during harvests, reducing the quality of the wheat crop and leading to fears that export volumes may be curbed. These fears caused wheat prices to spike in the Chicago and European markets. Prices fell again abruptly after government officials in both countries stated that such a policy was currently not being planned. However, uncertainty remains over whether export bans or curbs may be imposed later in the season.

In addition to policy factors, severe hot weather and drought conditions in several major producing regions have also affected wheat prices in recent weeks. The European Union, the Black Sea Region, and Australia are all experiencing significantly dry conditions that have stunted wheat growth and reduced production prospects. Finally, the ongoing trade war between the United States and China is also impacting global commodities markets, with pressure on soybean and indirectly on other staple commodities.

Importantly, production prospects are not alarming everywhere. According to the latest GEOGLAM crop monitor, for example, conditions for winter wheat and spring wheat in the United States remain favorable, with the exception of the southern Great Plains.