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Tough times for farmers

Corn and wheat futures prices skyrocketed so much that many members of the complex grain handling chain get worried. Farmers in fear.

Corn and wheat futures prices skyrocketed so much that many members of the complex grain handling chain get worried. Farmer cooperatives, elevators, flour mills and exporters – stopped buying because they feared they would not be able to sell at a profit.

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Others could not afford the industry-wide risk management strategy known as hedging, which keeps global commodity markets moving. The missiles hitting Ukraine rocked that system and caused brokers to try to bolster futures market positions that were costing them millions of dollars a day.

Gold wheat field and blue sky

Russia is the world’s largest wheat exporter and Ukraine is a major global supplier of wheat and corn. So the problem is that a lot of the world’s stocks is now in big uncertainty.

What about US farmers?

While some North American millers have said they have enough grain in stock from past harvests to continue production for several months, prolonged or repeated disruptions in grain trade could eventually add to already inflated food prices.

Meanwhile, the inability to sell some of its winter wheat, whose harvest begins in June, is weighing on U.S. farmers. Farmers now need cash to pay for seed and fertiliser before spring planting, as well as for land rent and tax bills due.

Fertilizer bills alone are expected to rise 12% this year, up from a 17% increase last year, according to the American Farm Bureau Federation and the U.S. Department of Agriculture (USDA). If U.S. farmers decide to cut production, it could limit yields for the fall harvest at a time when the world may soon need more grain.

Will there be pastry to bake with?

We cannot say exactly how the situation will play out in the coming months, but it is certain that if the situation in Ukraine remains unstable for some time, farmers around the world will start to see bigger and bigger problems.

Bruno is an Investment enthusiast with several years of experience in the industry. He enjoys following the latest news and technology trends...

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