As the Russia-Ukraine conflict moves into its second month, grain price volatility has stabilized, with May corn up $.65 a bushel since Russia crossed the Ukrainian border, while May wheat is up more than $1.60 a bushel. I’m quoting the May contracts because these prices reflect grain that is already harvested and in storage. However, there’s more than a little uncertainty about what markets will look like in the future, because Russia and Ukraine are among the world’s largest exporters of wheat, and Ukraine has recently been among the top corn exporters. The warfare and economic sanctions against Russia are expected to sharply reduce wheat and corn exports in the near term and suppress crop production because Ukrainian farmers haven’t been able to follow their normal planting schedules. Ukraine’s agriculture minister Mykola Solskyi warned that Ukraine’s ability to export grains was getting worse by the day and would only improve if the war with Russia ends. He said that his country would normally be exporting four to five million tonnes of grain per month, but the volume fell to just a few hundred-thousand tonnes in March.
The UN Food and Agriculture Organization is warning that an additional 13 million people around the world could be pushed into hunger because of high food prices and supply disruptions caused by the war. The organization stated that the global hunger rate of 9.9% was already the highest in 13 years, due to the pandemic.
Dan Basse, head of AgResource Company, an agricultural research and analysis consultancy contends that the Russian invasion of Ukraine was the biggest supply shock to world food supplies since World War I. He pointed out that wheat exports by Russia and Ukraine could drop to less than half of the shipments that USDA had earlier estimated for the current marketing year. In response to these dire predictions, the European Commission decided last week to allow European farmers to plant crops on fallowed land, and the American Farm Bureau Federation, National Grain and Feed Association and five other farm and food processing groups are urging the USDA to open up crop production on 4.1 million acres of cropland now idled in the Conservation Reserve Program.
The USDA is projecting that food prices will rise from 4.5% to 5.5%, in 2022, compared with 2021, based on the all-food Consumer Price Index. Food away from home prices are forecast to increase 5.5% to 6.5%, while food at home prices are now forecast to be up 3% to 4% in 2022.
On the good news side, starting in May, farmers and independent repair shops can buy the “John Deere Customer Service Advisor Tool,” which will end the requirement that only Deere-certified technicians can complete work on the company’s farm equipment. Starting at $1,200, the software will allow customers to clear and refresh codes, take diagnostic readings, and perform limited calibrations. This may be in response to the “Right to Repair Movement", that’s calling for legislation that promotes the ability for individuals and independent shops to repair electronics, medical, and agricultural equipment.
Religious leader and teacher Buddha wrote, “A dog is not considered a good dog because he is a good barker. A man is not considered a good man because he is a good talker.”
