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Wheat prices dipped slightly but remain on track for a weekly increase exceeding 9%, amid escalating tensions in the Black Sea contributing to potential disruptions in the grain trade from a key production region. 

The Russian Navy announced a live-fire drill in the area on Friday. This development concludes a turbulent week which witnessed Russia ending an agreement allowing Ukraine to export grain through some Black Sea ports, subsequently launching attacks on Ukrainian agricultural facilities. 

Both nations have issued warnings that vessels bound for their respective ports could be seen as military targets.

A grain storage facility in the Odesa region was hit by Russian missiles overnight, sparking a fire and damaging farming equipment, according to the region’s administration on Facebook.

The spike in prices could potentially reignite food commodity costs, which have been subdued since the onset of the conflict last year.

DM Agriculture Ltd. said, “Markets have reacted violently this week from the geopolitics following Russia’s withdrawal from the Black Sea Grain Initiative, and continued weather concerns across much of the Northern Hemisphere. The hype up in military action will also cause ship owners and insurers to be less confident in sending ships into what is now a ‘war zone’ environment.”

The escalating situation in the Black Sea amplifies risks to the international grain markets. Hot weather is jeopardising corn crops in southern Europe, while the forecast for the coming week predicts drier conditions threatening corn and soy crops in the US Midwest and Delta, as reported by Maxar. 

Additionally, food supply shocks were further exacerbated on Thursday, when India announced its intention to prohibit some rice exports.

While the International Grains Council increased its global grain production forecast for the 2023-24 season, expectations for wheat production were reduced.