Did Grain Futures Prices Overreact to the Russia-Ukraine War?

We study the impact of the 2022 Russian invasion of Ukraine on corn, wheat, and soybean futures prices. The war provides a natural experiment to evaluate whether futures markets are driven by investor herding. Using event study methods, we find that wheat futures prices rose by 30 percent above the counterfactual immediately after the invasion, more than corn futures prices, which were up by 10 percent. This relative price response cannot be explained by herding behavior. Instead, we argue the larger move in wheat was due to fundamental concerns over the possibility of a complete disruption of Black Sea grain exports, including exports from Russia, the world's largest wheat exporter. Soybean prices did not respond to the war, contradicting herding. There is no statistical evidence of abnormal speculative pressure in the market around the time of the invasion, and we conclude the markets put a fair price on the wartime risk of Black Sea grain shipment disruptions.