Black Bear Event

Agriculture markets have faced many black swan events over the past few years. Last week, markets were dealt with what one commentator termed a “black bear” event—Russia’s invasion of Ukraine. Notwithstanding the political and huminatarian crisis taking place in Ukraine, Russia’s invasion of Ukraine sparked repercussions in global corn, wheat, fuel, and fertilizer markets. Ukraine was projected to be the fourth-largest corn exporter this marketing year with exports of 33.5 million metric tons. Much of Ukrainian corn exports go to China and competes with U.S. corn into the market. Russia is the world’s largest wheat exporter, estimated at 35 million metric tons and Ukraine is the third-largest at 24.2 million metric tons. Russia and Ukraine together account for 30 percent of the global wheat exports, much of which goes to Turkey, the Middle East, and Africa.

Additionally, Russia is a major oil producer and oil prices responded to the invasion by flirting with $100 per barrel. And Russia is a major player in fertilizer markets, producing nitrogen, phosphurus, and potash and is a major exporter of ammonium nitrate. While most of the fertilizer exports go to Europe, given the already tight fertilizer supplies, any disruption will affect global supplies. It was reported last week the price of urea in New Orleans jumped $150-$200 per ton.

Russia’s invasion closed down Ukrainian ports and transportation. Sanctions on Russia will restrict its exports and financial transactions. Commodities markets swung wildly in response to the news. May corn and wheat futures jumped $0.53 and $1.43 per bushel respectively mid-week before tumbling by week’s end. Rough estimates suggest the higher mid-week prices meant $491 million in increased value for Nebraska producers on unsold corn from last year’s crop and $65 million in value on this year’s wheat crop. Needless to say, the volatility in markets created by the invasion can dramatically affect Nebraska producers.

It’s hard to see a return to “normal” regarding the Ukrainian and Russian situation in the foreseeable future. For Nebraska producers, the ongoing events mean greater market volatility with a potential for higher commodity and input prices. It makes an already challenging growing season that much more challenging.