Grain trade fears as war churns up  fields of Ukraine - Brian Henderson

From the outside, farming may seem to be at several steps of remove from the immediate consequences of the major geo-political ramifications of Russia’s invasion of Ukraine.

Ukraine is seen as one of the breadbaskets of the world
Ukraine is seen as one of the breadbaskets of the world
Ukraine is seen as one of the breadbaskets of the world

But while the industry might not be in the direct fire of the front line, in the global commodity markets the effects have moved speedily down the supply chain, with Ukraine’s reputation as one of the breadbaskets of the world seeing an immediate impact on the grain trade.

With the two countries directly involved in the conflict widely anticipated to provide almost a third of worldwide wheat shipments this year – while also accounting for significant levels of trade in maize and sunflower oil exports – alarm ran through the markets.

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As a result, the wheat futures markets shot up when the conflict started and while they declined from the peaks of the initial swing, a nervousness remains in the market due to the fact that, with world grain stocks already standing at historically low levels, the precarious future of Ukraine’s coming year’s crop and the ban on Russian exports could have a significant impact on the global availability of grain.

The levels of resistance being put up by the vastly outgunned Ukrainian forces highlight what some have said – that while it might be difficult to invade the country, it will be even more difficult to control it. So any belief which Putin might harbour of a swift integration of Ukraine back into an old Soviet-style regime is likely to be mistaken, and a long drawn-out messy affair is likely to be on the cards.

But it’s a sad fact that while growers in this country might be worrying about timing our first top-dressing of fertiliser or our T1 sprays, our counterparts in the area of conflict are likely to be more concerned about squadrons of tanks churning across their fields or missiles destroying their grain stores.

But, on the home front, the invasion has also had significant impacts on agriculture which look set to substantially increase the already high costs being faced by producers from the 2022 cropping season onwards, with fuel and fertiliser prices being pushed up beyond their current levels which already stand at a record high.

Rises in crude oil prices have swiftly converted to increases at the diesel – with the red variety following suit. And while orders were being taken for delivery this week, many distributors were unwilling to commit to a price as the markets were experiencing levels of volatility only seen during the Gulf War.

And, while Ukraine has been an important source of nitrogen fertiliser manufacture for export to the rest of Europe, Russia, which is actually the world’s largest exporter of such products has already banned the sale of fertilisers outside its own borders, which, in a year of scarcity, has had a significant impact not only on world supplies but also on its price.

Russia also influences the cost of production of such fertilisers in the rest of Europe due to the EU’s heavy reliance on gas from the state – and fertiliser prices which have already risen a massive three-fold over the course of a year could rise even higher. The cancellation of the Nord Stream 2 gas supply pipeline last week isn’t likely to do anything to hold prices down either.

So it’s likely to be a bit of an understatement that this will make things even more difficult for anyone yet to buy or take full delivery of their fertiliser – and there have been widespread reports that many UK suppliers and merchants have closed their books for orders and withdrawn from the market, such is the uncertainty of any future shipments coming into the UK.

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But while most in the farming world probably didn’t have sufficient time – or sufficient lack of conscience – to capture the initial huge swings in grain prices, I suspect the big business which controls fertiliser distribution will be less squeamish about manipulating the current situation to their own ends.

And although there has been little said about this in our own part of the world, the US Secretary of Agriculutre Tom Vilsack has, perhaps fearing reduced yields and production of grain, already issued a warning to American manufacturers and distributors not to exploit the current global market situation by charging farmers more than is necessary.

However I wouldn’t hold my breath for a similar announcement in the UK.



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