(Oct 1): Global agriculture prices notched their biggest quarterly jump since Russia’s invasion of Ukraine in early 2022 on fresh tensions in the Black Sea region and extreme weather, in a potential headwind for central bank inflation targets.

The Bloomberg Agriculture Spot Index, which tracks 10 key crops from soybeans to coffee, jumped 13% in the three months through September, the most since March 2022.

Intensifying fighting between Russia and Ukraine in recent months has choked crop flows from the Black Sea, a key global supplier of grains and oilseeds, tightening supplies and prompting import-dependent buyers in Asia and Africa to seek alternatives. Extreme weather has added to concerns, disrupting wheat and corn production in key growing regions from the US to Europe.

Global grain prices were also supported by continued Chinese purchases of US soybeans and optimism over bilateral trade ahead of the key summit between the countries’ leaders late last month. Following the meeting, the two sides announced that Beijing would cut tariffs on US crops including wheat and corn as part of a broader deal, while keeping additional duties on American soybeans.

The combination of supply disruptions and shifting trade flows is keeping global buyers on alert, with attention focused on any Russia-Ukraine peace talk prospects and more Chinese purchases. A sustained pickup in Chinese demand will be needed, however, to keep that optimism translating into stronger grain markets.

On the weather front, a strengthening El Niño — on track to be one of the strongest ever — continues to threaten agriculture production across regions, crimping forecasts for crops including palm oil and cocoa. India just capped its weakest monsoon season in a decade, threatening harvests and raising food-price risks. 

An ample outlook for US supply, after the Department of Agriculture released its latest report on Wednesday, has tempered some of the bullish sentiment. Chicago grains prices plunged on Wednesday before paring some losses. 

In the past quarter, corn and wheat in Chicago both climbed 15%. Soybeans gained 13%.

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