Volatility in Grain Markets Continue as Russia's War in Ukraine Wages On 

June 15, 2022

The U.S. grain industry continues to monitor the disruption of grain movement out of the Black Sea region because of Russia’s invasion of Ukraine and what it means for commodity markets moving forward.

Kurt Haarmann is Grain Division Senior Vice President for Columbia Grain International (CGI) and says it’s a very volatile time for everyone involved.

"The situation as it sits right now, is there's a stranglehold on Black Sea grain exports," said Haarmann. "There's some Russian wheat that's making it out to existing customers and contracts. Some of that is struggling in terms of payment, getting around the sanctions, finding banks that can pay for it and maybe pay in rubles as opposed to dollars. So, there's a lot of interruptions in that flow. The Ukrainian grain really is just at a trickle, and that's impacting corn markets pretty dramatically. The stranglehold on wheat on the Russian side is impacting wheat markets. And then just the uncertainty of what that all looks like and when that can unwind and when we can see those supplies back in the market has the market completely on edge. We just have an incredible amount of volatility."

The Black Sea region has grown into a significant export market for corn and wheat. Haarmann says this is why the world grain industry is seeing such a supply shock and that bodes well for U.S. farmers.

"The market should be well supported, if not just incredibly volatile moving forward," said Haarmann. "We did have some tightening going on in the world markets prior to this. We had some other stories too like dryness in the U.S. Certainly last year's crop was short of expectations for wheat and and we had dryness in South America through their harvest. There was a tightening going on. But this is a complete supply shock to the global market. Twenty years ago, this is maybe not as impactful, but the Black Sea has grown in importance in wheat and corn, certainly in veg oils in terms of sunflowers and sun oil. And it's a necessity in Europe. So, this has had a major impact and it probably has multiple years of legs to it in terms of unwinding."

He says CGI is helping its customers navigate through this volatility and take advantage of the marketing opportunities that are available.

"At Columbia Grain, we're about cultivating growth and we try to do that for both our grower suppliers and for our customers," said Haarmann. "Both are facing struggles right now, struggles with the volatility; struggles with the right time to act; and the procurement they're going to try to do. We try to be a consistent supplier to our customers downstream and provide marketing opportunities for our growers. We've introduced Columbia Producer Solutions which has a new array of contracting opportunities to take advantage of this volatility to get prices above current market. As we look forward, we're really excited about and the potential for our for grower customers."

Source: Western Ag Network