Escalating attacks between Russia and Ukraine are threatening the supply outlook from two of the world's largest wheat exporters, driving wheat futures higher for a second consecutive session. The conflict is increasingly disrupting shipping in the Black Sea region.

Consultancy firm SovEcon has lowered its forecast for Russian wheat exports this season by approximately 4%, citing shipping restrictions imposed on the Sea of Azov, which connects to the Black Sea. Media reports this week indicate that Russian officials have proposed equipping grain vessels in the Sea of Azov with various defenses—ranging from armor plating and anti-drone netting to heavy machine guns and mobile missile launchers—in response to Ukrainian drone attacks.

Simultaneously, Ukrainian vessels, ports, and other Black Sea infrastructure have again come under Russian attack. One Ukrainian agricultural group has warned that if the government fails to resolve the issue of blocked maritime exports, the agricultural sector could face a new wave of bankruptcies.

As the Black Sea harvest season reaches its peak, transportation disruptions threaten to slow shipment speeds during the critical export period and push importing countries to seek alternative sources of supply. In Chicago on Wednesday, the most actively traded wheat contract rose by as much as 1.5%.

Analysts at Rabobank, including Carlos Mera, noted in a report that these interruptions are expected to reduce Black Sea grain exports by "millions of tonnes" between July and September. Recent market anxieties pushed Chicago wheat futures to their highest level in two years. Although prices have since pulled back slightly, wheat is still on track for a monthly gain of 14% in July, which would be the largest single-month increase since the full-scale outbreak of the Russia-Ukraine war in early 2022.