Russia-Ukraine conflict continues to fuel volatility in markets

On an average year, Ukraine producers would be applying fertilizer on fall-seeded crops and getting inputs in place to start planting the spring crops. Neither is taking place at this point due to the war.

Tufts of wheat are coming out of the ground in straight rows. The photo is taken from overheaad.
Most years, farmers in Ukraine would be fertilizing fall-planted crops and preparing for seeding of spring-planted crops. Little of that is happening in 2022.
Kallie Jo Coates / Grand Vale Creative LLC

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The first week of March saw the biggest weekly gains in the commodities since 1974. May Chicago wheat was the big winner, closing at limit up in almost every session for the week. By the time the dust settled, May Chicago was up $3.4925 for the week, just 0.75 cent off a perfect score. So far since the beginning of the year, Chicago wheat is up 75%, diesel is up 62%, crude is up 54%, corn up 28%, soybean up 26%, and cattle down 8%.

Wheat was by far the leader of the grains the first week of March due to old crop shipment concerns as well as from concerns about 2022 production. With the closure of the ports in the Black Sea region, 29% of the world’s wheat is off the market. Reports are estimating Ukraine’s unshipped wheat sales at 7 million metric tons. Those sold bushels are expected to be shipped between April and July. If the war continues, most of those bushels will need to be sourced from another location.

Wheat is also seeing support from 2022 production concerns. Ukraine’s growing season is very similar to the northern Plains. On an average year, Ukraine producers would be applying fertilizer on fall-seeded crops and getting inputs in place to start planting the spring crops. Neither is taking place at this point due to the war. This is putting Ukraine’s 30 million metric tons of wheat production and 40 million metric tons of coarse grain production at risk.

The 2022 production concerns do not stop with Ukraine either. The U.S. southern Plains continue to see issues as well. Drought concerns continue to build as warm dry conditions have dominated Kansas, Oklahoma, Texas, and Colorado. The U.S. Drought Monitor map continues to show an advancing drought in the U.S. Southern Plains. The March 3 map is now showing 73% of the nation’s winter wheat is in some stage of drought. And the current forecast for the region is calling for warm dry conditions to continue to the next seven to 10 days.


Corn put in a strong performance, with support spilling over from the sharply higher US wheat complex. But some strength is due to exports, as it appears some of Ukraine’s 14 million metric tons of unshipped corn are starting to find new originations.

Soybeans continued to be the anchor in the grains. Improving weather conditions in South America is causing the main pressure for soybeans. The Russia-Ukraine conflict is not about soybeans, so soybeans are starting to feel a little left out. Export sales for soybeans remains strong and it is likely USDA will be forced to increase soybean exports in the next Crop Production estimate.

The big news that helped push the grains toward the end of the week were reports Russia attacked Europe’s largest nuclear power plant. The plant was on fire, but Ukraine officials contained the fire and has been able to put the fire out. The report goes on to say that there was damage done to the reactor, but that the unit is safe.

The front month contracts continue to see the most activity as traders continue to be worried about short term demand due to the loss of exports out of the Black Sea region. The market doesn’t seem to be as worried about long term issues, like getting the 2022 crop planted and who will be doing the farming and who will own the land once the military action is over. There seems to be a lot of questions without answers

The volatility in the grains is likely going to continue until there starts to be a de-escalation in the war. Volatility goes both ways and with wheat trading limit up in almost every session this week, it would not be surprising to see a little profit taking soon.

The food versus fuel debate is starting to heat up again. The Biden administration is looking at ways to counter food inflation. A few of the options under consideration are waiving the Renewable Fuel Standard biofuels blending mandates and looking at releasing land out of Conservation Reserve Program for a year. Neither option seems to have much of a chance in getting traction. The European Union, on the other hand, will likely let producers plant on 10% to 15% of their annual set aside acreage.

Recent rains in Argentina have helped the crop improve and stopped deterioration, but it likely will not add production. As of Friday, March 4, the Argentina corn crop was rated 21% good/excellent versus 4% the week prior. The soybean crop was rated 25% good/excellent versus 24% the week prior. Rosario is estimating Argentina’s corn crop at 48 million metric tons versus USDA’s 54 million metric ton projection.

Safras is estimating Brazil’s soybean production at 125.1 million metric tons, down 2 million metric tons from last month. AgRural lowered their Brazilian soybean production estimate from 128.5 million metric tons to 122.8 million metric tons. Harvest is estimated at 50% complete versus 41% average. First crop corn harvest was estimated at 45% complete versus 43% average. Planting of the second corn crop is at 70% complete versus 55% average.


By the start of the second week of March volatility remained strong in the grains but signs were starting to creep into the market showing the grains could be nearing a top, at least for the short term. Some of the signals were limit moves in both directions in the same day, cash bids being pulled or no quote for the product offered, end users rolling cash bids to further out months, basis level widening, increasing margin requirements, and increase daily trading limits. So far, we have seen all of those. But as is the case in any potential trend change, it takes two sessions in a row in the same direction to change a trend.

The U.S. did see a wheat export sale early in the week as the Philippines was in and bought 193,000 metric tons of hard red spring wheat overnight. Wheat conditions continue to be concerning. The March 7 Crop Progress report was neutral wheat as wheat conditions continue to decline but not by much, Kansas’s crop dropped 1% to 24% good/excellent, Oklahoma’s improved 4% to 15% good/excellent, and Texas’s crop dropped 1% to 7% good.

Soybean sales continue to be strong as importers seem to be bypassing the expensive South American soybeans and filling their needs with U.S. soybeans. USDA reported two sales of 132,000 metric tons of soybeans to China this week and another sale of 126,000 metric tons to unknown destinations. That marks seven straight days that the U.S. has made a soybean export sale.

Cattle continue to trade disappointing. Cattle are oversold and in need of a correction but with this week’s soft cash trade and economic concerns, it has been tough for cattle to show any kind of strength. Traders are concerned that the high cost of energy is holding the consumer back from eating out a lot and forcing the average consumer to adjust their buying habits. Tight supplies and solid exports are helping to hold the market up.

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