Staple foods, including grains and fertilizers, rise as Russia-Ukraine conflict escalates
Although not including food and agricultural products, US and Western sanctions against Russia for invading neighboring Ukraine have not slowed skyrocketing grain prices.
Traders believe that one of the consequences of the deepening war between the world’s two largest wheat exporters is higher prices. On Thursday, wheat jumped 6% to $9.34 a bushel, the highest in nearly a decade. Wheat futures are up 10% since January 1, 2022.
Soybean futures rose 44 cents to $17.65 a bushel and corn was unchanged.
“Unsurprisingly, grain markets are all up sharply, with Russian markets at times dropping 50% and the Russian ruble hitting all-time lows,” read a report released Thursday by Zaner AgHedge Group. “The Russian president is likely to take over the whole country, Ukraine is the world’s fourth largest exporter and the Black Sea ports are still in operation…”
Even though winter is the dormant period for wheat and crops sown in the spring won’t enter the ground for at least two months, Patrick Westhoff, director of the Institute for Food and Agricultural Policy Research ‘University of Missouri told Capital.com that what the conflict means for trade and pricing is still unclear.
“Short-term disruptions appear likely, which has contributed to recent increases in world grain prices. In the longer term, it depends on whether exports are interrupted for an extended period and in particular whether production is affected,” Westhoff said.
Russia and Ukraine are also major suppliers of corn oil and sunflower seeds to world markets, Westhoff said. The majority of grain is shipped from the Black Sea and lands in countries in the Middle East and North Africa, such as Egypt, Tunisia and Algeria.
Since neither the United States nor NATO has targeted food for sanctions, Russia’s ability to trade agricultural products on the world market will most likely be hampered by financial sanctions.
Additionally, the conflict made shippers reluctant to sail their ships through the region due to the dangers of war. A few hours after the start of the conflict, a Turkish bulk carrier was hit by a missile off Odessa. Maersk, the Danish shipping giant, said it will not call at any Ukrainian port and has stopped accepting orders to and from the country until further notice.
Grain-producing countries, such as the United States, Canada, Argentina and the European Union, could benefit from a long dispute if Black Sea exports are significantly hampered.
Fertilizers will also be impacted by the conflict. Already plagued by tariffs, transportation, supply chain issues and trade disputes, users can expect higher prices as Russia and Ukraine are the world’s top ingredient exporters. vital.
Belarus and Russia are the world’s top potash exporters, accounting for about 40% of global potash exports between them, said a senior agricultural commodities analyst who spoke to Capital.com.
In addition, Russia is a major producer and exporter of nitrogen, accounting for around 40% of global ammonium nitrate exports, around 20% of ammonia exports and more than 10% of global urea exports, said the analyst.
Moreover, Russia is also a major exporter of certain phosphate fertilizers such as MAP, accounting for around 15% of world exports.
Fertilizer markets were at extremely high levels before Putin’s actions, mainly due to supply issues related to high natural gas prices and high coal prices, and trade impacts, such as sanctions and limitations exports.
“I’m not going to predict a price level at this point. But the supply side implications are already visible; black sea ports are affected by today’s actions, physically bombed I believe, but trade had already been affected since last week. And a key pipeline carrying ammonia from Russia to Yuzhny appears to have stopped pumping,” analysts said.
Yuzhny is the southern island of the Novaya Zemlya archipelago, located in northern Russia.
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