Wheat, corn prices ride the Ukrainian rollercoaster

February 16, 2022: The crisis between Ukraine and Russia, two of the world's biggest wheat and corn producers, has sent the commodities' prices on a wild ride, with anything from a diplomatic statement to rumor of a maritime blockade roiling markets.

Usually much less volatile than stocks or oil, agricultural commodities are now often subject to spectacular spikes and drops.

"The market doesn't know nuance: Either it's war and it goes up, or it's peace and it goes down," said Gautier Le Molgat, an analyst at Agritel.

The grains' markets turned around three times in less than 24 hours this week: First on the Russian foreign minister's optimistic tone Monday, then on news of the United States relocating its Ukrainian embassy, and finally on Moscow's claims of a military pullback.

The stakes are especially high for wheat, with Russia being the world's top exporter and Ukraine the fourth, according to estimates by the US Department of Agriculture (USDA).

Together, the two countries account for almost a third of wheat's world trade.

On the corn side, Ukraine ranks fourth among exporters and accounts for approximately 22 percent of trade.

To date, however, the Russian army's movements have had little effect on Russian or Ukrainian exports.

While global wheat prices surge, Ukraine has seen its own rates fall by four percent over the last month, according to S&P Global Platts.

"If we remain in a latent conflict, volatility will remain in place and Russia and Ukraine will be losers in this," Le Molgat said.

"Their currencies will depreciate and few will risk buying from a distant origin without guaranteed delivery."

Ukraine is also the top sunflower oil exporter, with Russia a close second.

"We did see some customers that were pulling back buying sunflower oil from Ukraine, because they had worries about whether they would be able to deliver if they're involved in a military conflict with Russia," said Arlan Suderman, chief commodities economist at StoneX Financial.

However, according to Scheve, "over time, (such a latent crisis) would just be accepted as it's the risk that you face."

"And then until the problem rears its head again, that wouldn't necessarily put a premium on prices."

He also pointed out that exports from Ukraine and Russia traditionally slow down in March, "so that might be less of an issue."

AFP/APP