While international wheat prices are rising, the domestic market remains calm. Although domestic supply is secure, there is a transmission chain worth paying attention to—the price gap between domestic and international markets.

The global grain market has been volatile recently.

Since July, the price of U.S. wheat futures has been rising steadily, with a 9.62% increase in half a month, leading the bulk agricultural products at home and abroad. In addition, the price of September wheat futures on Euronext once surged by 3.5% in a single day.

Why have international grain prices soared? Will the domestic wheat market be affected?

Liu Bingxin, an agricultural analyst at Huishang Futures, analyzed that this round of international wheat price hikes is mainly driven by three factors.

First, the U.S. Department of Agriculture (USDA) data delivered a larger-than-expected bullish surprise. The USDA's quarterly inventory report released at the end of June showed that the planted area of wheat in the United States was revised down to 42.74 million acres, a 6% year-on-year decrease, hitting the lowest level since 1970. More importantly, the market had expected a slight increase in wheat planting area, but instead, it dropped significantly. This expectation gap directly ignited the market rally. The USDA's July supply and demand report further confirmed that the U.S. wheat supply was declining and ending stocks were decreasing, and the tight supply-demand pattern for U.S. wheat was already set.

Second, the Russia-Ukraine conflict escalated, disrupting maritime transportation of wheat between the two countries. Recently, after the Ukrainian military attacked more than 100 Russia-related vessels in the Sea of Azov, it also struck several Russian ships in the Black Sea. Meanwhile, Russia further intensified its attacks on Ukrainian ports, launching assaults on cargo ships in Chornomorsk, Odesa and Pivdennyi. On July 15, Ukrainian drones attacked grain-carrying vessels in the Sea of Azov, and Russia subsequently suspended shipping traffic on the Don River–Sea of Azov waterway. As the world's largest wheat exporter, Russia relies on this waterway for about 25% of its wheat exports. The suspension of the waterway's transportation capacity immediately sparked market panic about supply disruptions, and maritime insurance premiums rose accordingly. Data from the Ukrainian Agricultural Commission shows that Ukraine's capacity to export grain via Black Sea ports has lost about one-third due to the intensifying Russian attacks. The Hightower Report stated: "Both Russia and Ukraine seem to be trying to weaken each other's export revenues, which is a bullish factor for the grain market." However, Liu Bingxin said that the Russia-Ukraine conflict has lasted for more than four years, and the overall wheat exports of the two countries have not been greatly affected in the past two years. Combined, Russia and Ukraine account for nearly one-third of global wheat exports, so the actual impact of this shipping disruption may not be that significant. In addition, some consulting agencies analyzed that Russia is planning to transport wheat by land instead, but the cost will increase significantly.

According to reporters, the current Russia-Ukraine situation brings to mind the Black Sea supply shock at the initial outbreak of the Russia-Ukraine conflict in 2022. At that time, Ukrainian ports were closed, and millions of tons of grain were stranded and unable to be exported. A senior grain and oilseed analyst at Rabobank said that the market reaction in this round may be relatively limited. Although both incidents occurred during a period of tight global grain supply, the backgrounds are different: the 2022 conflict escalated before the start of the Northern Hemisphere's spring sowing and growing season, so the market worried not only about the disruption of exports but also about the decline in grain production; in 2026, the market's focus is mainly on the export link.

Third, extreme heat in Europe has caused a decline in wheat production. Western European wheat endured continuous extreme high temperatures during the critical grain-filling period, leading to a drop in the crop's quality rate. According to data released by France's Ministry of Agriculture on July 15, the estimated output of soft wheat in 2026 is 32 million tons, a 4% decrease compared with 2025 and about 2% lower than the average of the past five years. The signal of production reduction is very clear.

Despite the rise in international wheat prices, the domestic market remains calm.

Liu Bingxin said that China has a high self-sufficiency rate in wheat, and the quantity of wheat imported from Russia and Ukraine in recent years has been very small. According to customs data, China's total wheat imports from January to May this year reached 2.7029 million tons, an increase of 69.67% year-on-year, mainly coming from Canada, Australia and Argentina.

Guan Xiangbo, deputy manager of the Research Center of Zheshang Futures, said that China's self-sufficiency rate of wheat exceeds 90%, the summer grain inventory is sufficient, and the ration is completely self-sufficient. External supply disturbances are difficult to affect domestic wheat prices. The cost of a small amount of imported feed wheat and wheat for milling adjustment may rise, but it will not cause significant fluctuations in domestic grain prices.

While domestic supply is secure, there is a transmission chain worth paying attention to — the price gap between domestic and international markets.

Liu Bingxin reminded that if international wheat prices continue to rise and the price gap between domestic and international markets widens, it will eventually push up domestic wheat prices. After all, the strength of global wheat prices will increase China's import costs. She suggested that downstream processing enterprises can make appropriate purchases at low prices to maintain reasonable inventories; and grain holders can sell grain appropriately when prices rise.

In addition, the blockade of shipping in the Sea of Azov has also affected the international vegetable oil market. Hou Xueling, an analyst for oilseeds and oils at Everbright Futures, pointed out that the coastal areas of the Sea of Azov are the core producing regions for sunflowers in Russia and Ukraine. The vegetable oil exported by Russia through this waterway accounts for 17% to 21% of its total exports. However, July and August are the off-season for Russia's sunflower oil exports, with a planned monthly average export volume of 300,000 to 350,000 tons, which is far lower than the 450,000 tons in June. The global monthly average export volume of vegetable oil exceeds 6 million tons, so the impact of Russia's sunflower oil exports is relatively small and cannot reverse the loose supply pattern of global vegetable oils.

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