When Russia invaded Ukraine on Feb. 24, it brought into sharp focus just how interrelated the world’s commodity markets and supply channels are. Wheat and then corn prices shot up as farmers faced prospects of even higher fertilizer and fuel prices.

But producers and analysts who had been following those markets for months saw the developments as a continuation of a process that began when weather problems began to unfold in several regions of the world in 2020.

“I think we need to go back and remember that while Russia and Ukraine are on our minds, we didn’t get here overnight,” said Dr. Seth Meyer, USDA’s chief economist, speaking during a webinar presented by the U.S. Soybean Export Council. “We didn’t get here with these higher prices overnight.

“I think many of your producers would say prior to the fall of 2020, maybe their sentiment wasn’t so positive in terms of prices” he said. “In 2020, China comes back into the market. Demand is robust. We see corn and beans really show some strength.

“By the summer of 2021 Russia’s crop doesn't look so good, and the government begins talking about export controls,” Meyer noted. “Wheat grows its own legs, and prices start to rise again. Then the latest issue is simply Russia, Ukraine, the ability to export wheat and the ability to grow corn for the Ukrainians.”

The crop calendar for Ukrainian farmers is very much like for Iowa and Indiana farmers. “So they’re very anxious to get out there in the field, and the real question is peace and diesel fuel, right?” he asked. “Those are big questions out there for those producers. I think that that’s overhanging the market and causing a tremendous amount of uncertainty.

“I think the market’s looking forward to the next harvest, which would be South American corn, then to the U.S. planting and on and on,”

Uncertainty for food supplies

Mac Marshall, vice president of market intelligence for the USSEC and the United Soybean Board, noted that globally tight inventories for the major cereal grains and oilseeds, particularly in South America, are also adding to the uncertainty for global food supplies.

“Absolutely,” said Meyer. “Over the course of the last three months we cut Paraguay, Argentina and Brazil’s soybean production by a little over 30 million metric tons. That’s a big divergence in a market where demand is pretty solid. So there are a lot of things that have kicked us off and got us to this price position before the war, the South American harvest being one of them.”

Because Ukraine is a major exporter of corn, more attention is being focused on the South American crop where farmers in Brazil typically harvest two corn crops in a season.

“I think now we’re looking forward to the second crop corn in Brazil, following that the soybeans didn’t fare well,” Meyer said. “The corn went in early, which is usually a sign it’s got a better chance before the rain shuts off, but there will be eyes on that crop because it has to have that rain through May.

“So the market is looking for the next harvest there, but, when it comes to soybeans, it is the North American crop it has to look forward to for oilseeds.”

“I think the relief for the global marketplace probably can’t come fast enough, and that’s why it’s certainly exciting to see that we have so many beans projected to go into the ground this year,” said Marshall, referring to USDA’S forecast of 90.9 million acres of soybeans in the U.S. in 2022.

To view all of the USSEC Planting Intentions Report Webinar, visit https://www.youtube.com/watch?v=pgBQny6Nxr4.