After a year of war, Ukraine’s corn and wheat production and exports are of broad market interest because Ukraine’s exports comprise a significant share of the global markets, said Joe Janzen, economist at the University of Illinois and Carl Zulauf, economist at the Ohio State University, in the Farmdocdaily.
Overall, corn and wheat exports from Ukraine in the 2021/22 marketing year were down 20% from projections made before the conflict, Janzen and Zulauf said. For 2022/23, large declines in exports initially were expected but have not been realized.
After spiking in the months following the invasion, commodity prices have moderated to pre-war levels, which remain high in historic terms, the economists said. Going forward, corn and wheat markets could be balanced with production elsewhere.
MARKET EFFECTS
Changes in Ukrainian agricultural production in the past year illustrate the severe effects of war on market volatility, their report said. May 2022 corn futures rose $1.32 a bushel, or 19%, from Feb. 24 to April 18, they said, while May 2022 wheat futures rose $2.36 per bushel, or 27%, over the same period, briefly touching a high of more than $13.60 in early March.
Since the Spring of 2022, prices have moderated, the economists said. In general, the Black Sea Grain Initiative appears to have had a significant effect on the market’s perceptions of the global supply and demand balance.
IT’S NOT OVER
Moderating prices and increased Ukrainian exports do not imply the effect of the war is over, they said. First, the situation on the ground remains tenuous. The ability for Ukrainian exports to flow from Ukrainian Black Sea ports is limited by the continued maintenance of an agreement between the warring states.
The Black Sea Grain Initiative has been continued in 120-day intervals, but there is no guarantee Russia will agree to allow further exports the next time the agreement is due for renewal in March.
Going forward, corn and wheat markets will balance the supply response to high prices occurring in other major production regions with continued war-induced supply losses in Ukraine, the economists said. Prospects for 2023 Ukrainian production may be poorer than in 2022 and much more uncertain.
Ukraine’s 2022 wheat crop was already planted prior to the invasion. Logistics required to get necessary agricultural inputs like seed and fertilizer to Ukrainian farms may be more difficult now than in 2022 when some inputs were already on farms.
Finally, the market also must consider how elevated Ukrainian grain stocks will be incorporated into the world market if peace does break out.
All these factors point to continued market volatility in the year ahead.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $160.20 to $165.08 per cwt, compared with last week’s range of $160.59 to $162.08. FOB dressed steers, and heifers went for $254.27 to $258.82 per cwt, versus $251.10 to $258.71.
The USDA choice cutout Tuesday was up $0.61 per cwt at $288.95 while select was unchanged at $279.25. The choice/select spread widened to $9.70 from $9.09 with 68 loads of fabricated product and 30 loads of trimmings and grinds sold into the spot market.
The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $1.50 to $1.60 a bushel over the Mar corn contract, which settled at $6.29 1/2, down $0.13 1/4. Bids in Kansas were steady at $0.75 over May, which settled at $6.30 1/4 a bushel, down $0.13 1/4.
No cattle contracts were tendered for delivery on Tuesday.
The CME Feeder Cattle Index for the seven days ended Monday was $182.62 per cwt, up $0.38. This compares with Tuesday’s Mar contract settlement of $189.80 per cwt, up $0.62.