The grain markets saw waves this week, and agricultural economists say it revealed just how much traders think the vital grain corridor is worth.
Fireworks in the markets started Monday as Russia said it would no longer grain-export deal, however Turkey and the United Nations continued grain shipments, despite the news. Then, just two days later, Russia announced reversed that decision, with prices plummeting.
“We found out that the Ukraine-Russia corridor represents about 55 cents in the market,” says Ben Brown, agricultural economist at the University of Missouri “Prices went up 55 cents when Russia pulled out and they came back down 53 cents when it looked like Russia was back in.”
Brown says the market action was headline driven, but he points out there are were other fundamentals and outside factors that also pressured price.
“Exports are soft and struggling across some of our commodities across the board with the high dollar doing its job there as well and curtailing some demand,” Brown adds. “Then we look out ahead and think about what’s gasoline consumption look like or this next year? Where are we going to produce these bushels in the world? I think all those things are front in mind and continuing to play into these markets.”
What may be even more of a question is why nine months after Russia invaded Ukraine, rumors are still moving the markets.
“It has been important to see how these markets are moving in response to relatively modest news,” says Pat Westhoff, an agricultural economist with University of Missouri’s Food and Policy Research Institute (FAPRI). “You wouldn’t expect that kind of movement to happen on just a rumor, right? And here, we’re back to where we were just a few days ago. So, expect to see continued uncertainty, continue moving markets, as there’s new reports about the latest possible development across the world.”
Farmers are also navigating the news, watching prices shoot up more than 50 cents one day, and two days later, wipe out all those gains.
“I’d say it’s across the board risks that we have to really talk about now today, whether it’s what do I want to do on the input side, we know those inputs continue to be high, and in some cases, there are opportunities, maybe for some lower costs,” says Scott Brown, University of Missouri agricultural economist. “But at the same time, I’ll just say that there’s a lot more dollars at stake in getting that crop in the ground. Interest rates are higher, I don’t think all this uncertainty goes away. How much can these individual operations handle in terms of added risk to their operation? It’s not a one size fits all. But risk management is so much more important. I’d rather hit singles and doubles than strike out trying to hit a home run.”
