The recent deal brokered by the United Nations, allowing Ukrainian grain exports to leave the port of Odessa, can only explain a fraction of the shift: it was inked in late July, after most of the decline in prices. More can be credited to the strength of Russian wheat exports. America’s agriculture department suggests that Russian farms, far from being disrupted, will export a record 38m tonnes in 2022-23, some 2m tonnes more than they managed the previous year. A bumper harvest is under way, in part due to good weather earlier in the year, and there is strong demand from traditional importers in north Africa, the Middle East and Asia.
The worries about shortages may have been overstated in the first place. Charles Robertson of Renaissance Capital, an investment bank, argued at the time that cereal traders were overexcited—wrongly grouping together long-term disruption to oil-and-gas supplies and less plausible prolonged disruption to the food supply. “Global wheat stocks were extremely high,” says Mr Robertson, “which told us either that the relationship between stocks and prices had broken down or...that speculation had got ahead of itself.”
The sheer volume of speculation on futures markets may also help explain the volatility. Michael Greenberger of the University of Maryland, formerly a division director at the Commodity Futures Trading Commission, a regulator, notes that rules limiting speculation are routinely avoided by American banks, which assign swaps to their foreign subsidiaries.
The drop in prices will not immediately feed through to consumers. Wheat and other cereal prices have returned to their pre-invasion levels when priced in dollars, but not in many other currencies. The greenback has climbed this year on the expectation of more rapid interest-rate rises by the Federal Reserve, leaving some emerging-market economies struggling. The Turkish lira is down by 26% against the dollar this year and the Egyptian pound is down 18%. The countries are two of the three largest wheat importers in the world.