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Ukraine shipping agreement 'very difficult to execute,' CHS analyst says at Farmfest

Kent Beadle, director of producer brokerage, CHS Hedging, addressed the invasion of Ukraine and other market disruptors during a talk on Tuesday, Aug. 2, the opening day of the 2022 Farmfest gathering in Morgan, Minnesota.

First grain ship departing Ukraine arrives in Turkey for inspections
The Sierra Leone-flagged cargo ship Razoni, carrying Ukrainian grain, is seen in the Black Sea off Kilyos, near Istanbul, Turkey, on Aug. 2, 2022.
Yoruk Isik / Reuters
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MORGAN, Minn. — It’s going to take a lot more than a piece of paper to get grain shipped out of war-torn Ukraine in the estimation of Kent Beadle of CHS.

Beadle, director of producer brokerage with CHS Hedging, addressed the invasion of Ukraine and other market disruptors during a talk on Tuesday, Aug. 2, the opening day of the 2022 Farmfest gathering in Morgan, Minnesota.

The first ship carrying Ukrainian grain departed from the port city of Odesa under a United Nations-brokered deal to ship grain that some countries desperately need.

IMG_1259.JPG
Kent Beadle of CHS Hedging discusses market disruptors on Tuesday, Aug. 2, 2022, at Farmfest near Morgan, Minnesota.
Jeff Beach / Agweek

But Beadle called the agreement involving Russia and Ukraine “very difficult to execute.”

“I don’t believe it’s going to happen,” Beadle said of shipments in and out of Black Sea ports.

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For one thing, insurance rates for a shipping vessel trying to navigate through waters riddled with explosive mines is going to be “exceptionally high,” Beadle said, if an insurer can even be found. Those insurance costs will ultimately be passed on to the buyer.

People capable of piloting a ship through those waters also will be in high demand, Beadle said.

“Not every mine is tethered,” Beadle said. “Some of them are floating.”

Beadle said most of Ukraine’s 2021 wheat crop got exported but a lot of corn has been sitting at port.

Even if a ship can get out, the corn that it will be carrying has likely been sitting at the port for months and is likely in less than ideal condition, Beadle said.

To get the new crop wheat out of Ukraine, Beadle said it will require getting ships back into ports before they can get loaded out. And the agreement is only for 120 days.

Beadle said there is some export activity through Poland, but that includes unloading grain out of Ukrainian railcars and reloading into Polish railcars because the companies use two different sizes of tracks.

“We don’t believe ports are going to be operational for a very long time,” Beadle said.

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Fuel shift

Some other disruptors that Beadle covered included the momentum behind renewable fuels and electric cars.

The growing demand for renewable diesel and the number of soybean crush plants and refineries in the works may mean the need for an additional 10 million to 20 million soybean acres by 2024, Beadle said.

“This is huge,” Beadle said.

As for President Joe Biden’s goal of having half of new cars being electric by the year 2030, he says, “I don’t think that is attainable,” but “Detroit is trying to get there.”

But even if that goal were reached, having 50% of new cars still with internal combustion engines, the demand for ethanol won’t disappear overnight.

“There’s a very, very long tail for ethanol,” Beadle said.

What about a recession?

One looming question over the whole U.S. economy is the prospect of recession. What might that mean for ag commodities?

He said there have been eight major recessions since 1972; of those three recessions resulted in lower commodity prices, three recessions saw prices hold steady and two saw prices rise.

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“Bottom line is, we don’t think this recession is necessarily going to have any negative impact in farm gate prices,” Beadle said.

Reach Jeff Beach at jbeach@agweek.com or call 701-451-5651 (work) or 859-420-1177.
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