Masters in Business · Wednesday, July 22, 2026
Sal Gilberti identifies weather and geopolitics as the primary drivers of wheat price volatility. He explains that while sanctions typically do not apply to food, geopolitical events like the Ukraine war can create a 'war premium' affecting shipping and thus prices, but prolonged droughts in major producing regions are the most significant factor, potentially leading to sharp price increases.
“Honestly, for wheat, it's it's weather and geopolitics. And again as we saw, you know, if you see if you see the choke points, which primary is Black Sea is a choke point, all right, So that's the geopolitic part. And it look at understand, even during the height of the Ukraine War and the political fallout in the first year of that, you could still buy Russian wheat. Anybody who wanted to could buy Russian week Sanctions don't go on food that you don't do that, like even during war, nobody puts sanctions on food. You can import food from your enemy. It's perfectly legal, but you might not go to ship to go in there because of the war premium and all that, but you can buy it. Nobody's going to put restrictions on food.”
“So as soon as people figured out, well, wait a minute, there's going to be free flow, that price came back down. Where you have an issue is when it doesn't rain, because again, that pile at harvest is small. You've only got on average six months excess supply at any given time. In the world of wheat, if if you have a major problem, a major crop problem, be a drought or disease in a major producing area, suddenly you have five months or four months. What if that happens two years in a row and they have one month to two months. That's why the price is so responsive, and that's why when you see these things flatlined at the low long term price levels, that's when you need to look at maybe an allocation to those things.”