The Russian Attack Is Already Affecting Markets For Iowa Farmers
By now it’s not news that Russia began its attack on Ukraine Wednesday night. That attack is already impacting U.S. agriculture- especially in the grain markets.
This stress is not only seen on markets and the economy but there are also the effects it can have on the global food supply.
In a report from Iowa Agribusiness Radio Network, Jim McCormick with AgMarket.Net said that what we are seeing with the market is a “knee-jerk” reaction. He adds that it makes sense seeing how much grain exports Ukraine accounts for.
“Ukraine roughly represents about three percent, you know, three to four percent of the world's corn production between the Ukraine and Russia,” said McCormick. “But when you get to the wheat production, they're roughly almost 14-15% of the world's wheat production.”
And with the rising conflict, McCormick said they are unsure if that Ukraine will get its product out.
“Are they going to get that harvested if you're in the middle of a shooting conflict? Trying to get this corn crop planted,” said McCormick. “So, if you take all that bushels pretty much off the board, you still have people in the world to feed, you're just going to kind of shake up how the cards are played, and it looks like you're probably going to get more and more demand to the United States.”
Right now, we don’t know how bad the market is going to get. McCormick said that it could calm down in the next couple of days or weeks, but it’s too early to tell.
Not only will this impact the grain markets but Kansas Senator Jerry Moran told Rural Radio Network that the energy will also see the impact of the conflict.
“Diesel fuel, fertilizer, all will be impacted. Despite some higher commodity prices, the input costs have been skyrocketing already because of the supply chain and transportation. So, this administration, this Congress ought to come together and increase the energy production in the United States and help our allies in Europe meet their energy needs, but do something significant to take the price back down, damaging the Russian economy.”
Russia and Belarus are big exporters of fertilizer and Belarus is allowing Russia to invade Ukraine through its borders. This means if the U.S. does decide to strike back, there could be price shifts in already high markets.
“So, you got a country that we are reliant on some of their fertilizer, at war with a country that we are trying to sport as trying to keep their democracy and you know, it's going to get very challenging. The logistics issues are probably going to get worse before they get better,” said McCormick.
These market jumps may only be short-lived, so McCormick says this could be a good time to look beyond 2022.
“So, if you're a producer out there, you know, how do you handle this? You dribble sales in. You buy inputs under the market and then realize those puts may expire worthless. But if the market keeps can going higher, you keep ratcheting up that floor,” said McCormick. “You don't want to just sell the 22 production you probably want to think about selling the 23 and maybe even laying off some of the risks in 2024 because more than likely, these prices will not be seen for many, many years.”
Moran also adds that now is a good opportunity to fill in the gap of wheat supplies due to the shutdown of Ukraine Ports.