Russia-Ukraine Conflict Adds To Marketplace Uncertainty
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ommodity futures prices such as corn and cotton and crude oil had already been steadily rising over the past year as users of these products found it increasingly difficult to keep pace with a demand boom that came as economies recovered from the pandemic. Russia’s recent invasion of Ukraine only worked to drive commodity markets higher as exports from that region began to dry up. You can see this demonstrated in the corn chart below where an already increasing corn futures price bounced significantly starting in early March. According to professionals in the trading community, this recent sharp price increase was due almost entirely to the Russia-Ukraine situation as past concerns about topics such as the health of the South American soybean harvest quickly faded into the background.
BY JOHN MILLER
The bottom line is that Russia is a power very powerful player in the world supply of energy products, metals, and crops. In addition, the Ukraine is a top exporter in grains, particularly wheat and corn. The politics of this situation will likely continue to impact commodity prices for some time which unfortunately will work back to increase food and gas prices for American families. This past week, the US banned the importation of Russian oil, gas and other energy products as Russia simultaneously began to restrict the export of selected goods and materials to “ensure the security of the Russian Federation”. The exact list of is not yet know but is expected to include wheat and fertilizer. The fact that Russia is a major exporter of fertilizer to the US places more uncertainty about famers getting some relief from the already high input prices. The Ukrainian ports remain inactive due to the invasion but are largely in working condition. The commodity trading community will be closely watching to see when the Ukrainian and Russian ports return to loading since these ports represent approximately 30 percent of the world’s wheat exports and up to 15 percent of the world corn exports. Much like US farmers at this time, the Ukraine farmers would normally be preparing to plant their crops which is vital to restoring the export potential for wheat and corn from that part of the world. Unfortunately, a great number of Ukraine farmers do not have supplies of seed or fertilizer to plant corn with the chances of getting them in time are fading since the ports are closed under Russia attacks. Supply logistics are further complicated since the rail system is busy getting people out of the war zone and giving top priority to move in military and food
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