Stu Ellis: Ukraine Invasion So Far Away, Yet So Near For U.S. Agriculture

By Stu Ellis

Decatur, IL — Vladimir Putin’s invasion of the Ukraine is a long way from central Illinois geographically, but very close economically.

As we all watch with curiosity as we try to comprehend the reason for the conflict, every moment can be measured in financial terms that will be either positive or negative for U.S. agriculture.

Coincidentally, the invasion of the Ukraine occurred at the same time reports came out about La Niña’s damage to soybean production in South America.

Commodity futures in Chicago wildly reacted, setting a high that may not be revisited for years to come.

Cash soybean prices at Paranagua, Brazil, were $17.88 in terms of U.S. dollars and bushels, and approaching that at the Board of Trade.

But with the prospect of war looming in one of the world’s most productive agricultural regions, the reins were yanked and the market’s horsepower was thrown in reverse.

March soybean futures that were above $17.50 per bushel fell under $16 the following day and are reflecting historic volatility.

Because the region of fighting produces 30% of the world’s wheat, and there is uncertainty how much might be harvested this year, Tuesday morning (March 1) futures for Kansas City hard wheat surpassed $10.

Granddad would ask if that was for a truckload, assuming his hearing was faulty.

With the markets roiling, it makes it difficult for farmers to manage their price risk and extraordinarily expensive for grain elevators to do so, because of their needs for cash in hedging accounts.

The challenges for the Ukrainian farmers are whether they will be able to plant spring crops, many of which would ordinarily find their way to export markets.

Those include corn, small grains, sunflowers, and even some soybeans.

On a related front, the expected 4 million refugees from the Ukraine who are fleeing into neighboring European countries will have one of the biggest impacts for food aid relief unseen in many years.

Food is likely available, but logistically it is not where it will be needed.

And small children cannot wait for a ship to be unloaded several hundred miles away.

And since those victims of war are not the only ones needing food around the world, more issues arise.

Former U.S. Department of Agriculture Chief Economist Joe Glauber said last week, “Redirecting the current consumption of food crops (maize, wheat, oilseeds) to non-food uses around the world, from the EU to Indonesia, is already generating significant tensions in food and fertilizer markets.

"A holistic approach regarding food and energy security is critical in ensuring that food and nutrition outcomes remain a priority.”

And his mention of fertilizer raises the specter of future food shortages.

Unfortunately, the world has looked to Russia and neighboring Belarus for their vast supplies, which may be scorned by international trade from reaching fields where they are needed.

While U.S. farmers get the itch this week to head to the field for early soybean planting, they will be thinking about their counterparts in Ukraine who instead are having to defend their fields instead of planting them and hope Vladimir Putin soon makes his trip across the river Styx.

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