Wheat prices drop to pre-war levels after Ukraine and Russia strike deal to unblock shipments

• Wheat prices dropped almost 3% on Friday following media reports that Ukraine and Russia struck a deal on grain shipments.
• The price, which hit record highs after Russia's invasion in February, is now back to pre-war levels.

Wheat prices tumbled on Friday after Ukraine and Russia reached a deal to allow crucial grain shipments to safely leave Black Sea ports, according to media reports, potentially alleviating a brewing global food crisis.

US wheat futures dropped almost 3% to a five-month low of $786 per bushel, meaning the price has unwound almost all of its "war gains." Russia invaded Ukraine in late February, triggering a 70% surge in the price of wheat to a record high of over $1,300 in the two weeks that followed. The two countries together account for a quarter of the world's wheat exports.

The BBC said Turkey successfully brokered a deal between the two sides.

Drought across key growing regions like the United States, India, and Canada earlier in the year threatened to further squeeze availability of wheat and other grains, putting millions around the world at grave risk of hunger. Some countries, such as India, instituted export bans to stave off unrest at home.

Food price inflation is hurting the pockets of consumers everywhere, but it is felt most acutely across the developing world, where the combination of soaring inflation and a stronger US dollar is pushing a number of countries, such as Sri Lanka, to the brink of bankruptcy.

Some 20 million tonnes of grain has been held up in the Ukrainian port of Odessa, according to the BBC.

Turkey has been mediating between the two sides, along with the United Nations, for the past two months to try to reach a deal to end a Russian blockade of Ukrainian ports. Moscow has said there is no blockade and any hold-up is the result of Western sanctions and mines laid at sea by Ukraine.

"If successful, it would further reduce the risk of a food crisis over the coming months. Ukraine, a major exporter of high-quality wheat, corn, and sunflower oil has seen its main export artery through the Black Sea blocked since March," Saxo Bank strategist Ole Hansen said of the deal in a recent note.

Since the invasion, the wheat price has gradually subsided, having fallen some 42% since then. But US wheat futures are still 15% above where they were last year and, in Europe, the situation is more acute. Benchmark French milling wheat futures are 65% higher than this time last year, and UK feed wheat is 50% pricier.

Russia and Ukraine have agreed to monitor ships to and from ports including Odessa at two separate control centers — one located in Istanbul and the other on the Black Sea, the FT reported on Thursday.

Turkey would inspect ships to ensure no weapons were smuggled, and Russia would guarantee ships safe passage, under the terms of the deal.

The BBC quoted a US State Department spokesman as saying the government welcomed the deal but would focus on ensuring Russia implemented it.

"We should never have been in this position in the first place. This was a deliberate decision on the part of the Russian Federation to weaponize food," said the department's spokesman, Ned Price, according to the BBC.

Ukraine is a major exporter of other important foodstuffs such as barley, corn, and sunflower oil, as well as industrial commodities like fertilizer - shortages of which have only made the pressure on farming worse - iron, coal, steel and refined petroleum products.

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