Main points
- Global prices for wheat and soybean oil fell after the announcement of a two-week truce between the US and Iran.
- Negative price dynamics also affected fertilizers and sugar due to lower oil prices, which reduced production and supply costs.
Grain prices have fallen / Photo Pixabay
Global agricultural markets reacted sharply to news of a ceasefire between the US and Iran. The easing of tensions caused prices for wheat, soybean oil and other commodities to fall.
Markets reacted instantly: wheat and oil went down
Global agricultural prices fell sharply after a two-week truce was reached between the United States and Iran, Bloomberg reports. The easing of geopolitical tensions has reduced the so-called “war premium” that had previously supported quotes.
Agricultural markets have been rising in recent weeks as the conflict in the Middle East escalates, sending oil prices soaring and complicating logistics due to restrictions in the Strait of Hormuz, a vital route for fuel and fertilizer supplies.
After the truce was announced, the strait was partially opened, which gave the market a signal for a quick correction. In particular, wheat in Chicago fell by 3.5%, reaching its lowest level since early March. Soybean oil lost up to 5%, showing the biggest drop in recent months.
Pay attention! Analysts note that even though the restoration of logistics may take weeks or months, markets react instantly. An additional factor of pressure on wheat remains sufficient supply on the world market.
Fertilizers and sugar are also getting cheaper
The negative dynamics also affected related sectors. Shares of fertilizer producers fell sharply as falling oil prices reduced their production costs and eased supply tensions.
The decline in energy prices has also affected the sugar market. When oil prices rise, producers are more likely to direct their sugarcane to biofuel production rather than sugar. Accordingly, lower oil prices reduce demand for biofuels and put pressure on sugar prices.
Interestingly, sugar futures have been falling for eight trading sessions in a row since reaching their peak in late March. However, the fundamental situation remains stable: the market supply is sufficient, thanks in part to Brazil, which has not changed domestic fuel prices even amid the conflict.
Fuel from the fields: how can rapeseed reduce Ukraine's dependence on energy imports?
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Ukraine can reduce its dependence on energy imports by growing rapeseed for biodiesel production.
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Despite the great potential, domestic biodiesel production is limited, while most rapeseed is exported to the EU for processing.