The Russian invasion of Ukraine has sparked extraordinary gains in prices of grains, oilseeds, and energy products this past week. A world already tight in supplies of many key commodities, and experiencing the highest food price inflation in a decade, is now confronting potentially major disruptions in exports from two of the world’s biggest agricultural producers.
With no sign that the onslaught will abate, worries about commodity prices and global supplies will continue. It will be important to watch crop production outlooks in other major producing countries to assess whether harvests will be sufficient to replenish tight worldwide stocks.
Week in Review
- Wheat futures on the CME jumped 41% from a week earlier, hitting limit-up closes on four separate days. The May contract surged to a 34-cent premium over July, the biggest spread at this time of year since 2008, while the July contract sits at an unprecedented 195.25-cent premium to the December contract, underlining the exceptional concerns about near-term supplies.
- Prices rose for a range of vegetable oils, including soybean oil futures, up 6% on the week, and rapeseed futures, up 13%. Export restrictions on palm oil— the most popular edible oil — by top producer Indonesia have already sent big importers such as India scrambling for alternative supplies.
- Fertilizer prices also surged — futures prices for urea, a type of nitrogen fertilizer, rose 28% for the week, while diammonium phosphate, or DAP, futures gained 11%.
- Russia’s trade ministry called for a halt to fertilizer exports, even as international sanctions bedevil Russia’s trade financing and ships are steering clear of war-zone-adjacent ports. Russia normally is the world’s biggest exporter of fertilizers, ranking No. 1 in nitrogen fertilizers, the most widely used.
- Potash exports from Belarus, a Russian ally, also have been targeted for Western sanctions.
- Natural gas prices rose sharply, driving up costs for fertilizer manufacturing companies worldwide.
Bumper harvests in the upcoming North America season will be needed to replenish dwindling global stocks of many commodities. But input costs are up sharply — fertilizer prices more than doubled over the past 18 months — which is expected to bite into farmers’ net profits. So far, however, the outlook for US hard red winter wheat production is poor, according to Gro’s machine learning-based Yield Forecast Model.
- US farmers will increase corn acreage this year by nearly 2% to 95 million acres, according to Gro’s US Planting Intentions Model. Spring wheat acres also will expand, while soybean acreage will decline. Estimates by Gro’s AI-driven model come in advance of the USDA’s report on planting intentions estimates at the end of March.
- Soybean production in Argentina, the No. 1 exporter of soybean oil, looks set to match last year’s production, Gro’s Argentina Yield Forecast Model shows, after recent rains helped the crop recover from a damaging drought.
- India is headed for its sixth consecutive bumper wheat crop, according to Gro’s India Wheat Yield Forecast Model, putting it in a good position to help fill some of the gap left by reduced exports from the Black Sea region.
Russia-Ukraine Crisis Ignites Fertilizer Prices at Critical Time for World Crops
Gro’s US Planting Intentions Model: Setting the Stage for the Year’s Crop Outlook
Russia-Ukraine Crisis to Boost India Wheat Exports
Impact of the Russia/Ukraine Conflict on Global Agriculture by the Numbers