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Limit Up

By Tori Uhland

August 11, 2023

Due to a few changes outside of anyone’s control, things may look a little different here. I don’t want to give anyone outdated information, and the best way I can think to do that is by focusing on the bigger picture instead of the day-to-day news and commentary.

Ever since I started trading, I’ve been amused by the fact that something going on across the world can impact my day just as much – and sometimes more – than something going on across the room.

As you can probably tell, the conflict between Russia and Ukraine has had far-reaching consequences on various sectors, including agriculture. The nature of global trade means that disruptions in one region can send shockwaves across the world. Supply chains, trade relationships, and commodity prices have all been influenced by the conflict. Ukraine has long been known as the “breadbasket of Europe,” being a significant exporter of wheat, corn, and other grains. However, the ongoing instability has disrupted these supply chains, leading to uncertainty in global commodity markets.

Trade relationships between nations can be finicky and some are unstable, made worse by geopolitical conflicts. The Russia-Ukraine war has brought about a shift in these relationships, affecting the way the U.S. and the rest of the world engages with both parties. The war has led to trade restrictions and embargoes, altering the dynamics of these trade flows. It has also contributed to fluctuations in prices of agricultural commodities, affecting farmers and consumers alike.

For instance, the uncertainty surrounding Ukrainian grain exports has led to speculations about potential shortages, driving up prices in global wheat markets. This, in turn, can impact the cost of various food products that rely on wheat as a key ingredient. Similarly, the imposition of tariffs and trade restrictions can lead to price hikes for products that are subject to these changes. You would think that this could create an opportunity for the U.S. to export more grain, but unfortunately it isn’t that simple. When prices are driven higher, that makes our products less competitive in the world market. High prices might be good for a farmer selling their crop, but high prices make many domestic and international consumers into less willing buyers.

Most recently, the situation has escalated with Ukraine attacking Russia’s export infrastructure in retaliation. Ukraine has also started a new and temporary Black Sea “humanitarian corridor” for commercial ships that are blocked at Ukraine’s ports. There are still risks between mines in the Black Sea and Russia’s military, but the fact that the market hasn’t reacted in a very bullish way probably means that our markets are already overpriced, which is something to consider while marketing your production. However, tensions could ramp up dramatically if Russia were to attack this new corridor. Ukraine and Russia are both harvesting wheat, and any disruptions could cause crop storage to be an issue.

As the conflict continues to evolve, the agriculture sector will continue to find ways to navigate these challenges and respond strategically to the changing landscape. Ultimately, the Russia-Ukraine war serves as a testament to the interconnectedness of the global economy, where disruptions in one corner of the world can impact us right here at home, thousands of miles away.

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