Grain and oilseed futures markets screamed higher over the past week with Russia pulling out of the grain corridor agreement.
Tensions escalated quickly with Ukrainian forces bombing the bridge to Crimea while Russia started sending missiles to take out critical grain infrastructure located at the ports of Odessa. At the time of writing, it can be assumed that Ukraine can no longer export grain via deep sea vessels- all port infrastructure has been destroyed by the Russian attacks.
It is possible to export grain overland to the west, however the Polish and Romanian Governments are concerned that the flood of supply will depress prices and force their farmers out of business.
For now Ukrainian grain can only move via the Danube River. Over time smuggling will increase and the grain and oilseeds will find their way to markets- but at a huge cost. While much of the media hype has surrounded wheat, canola is likely the commodity to be mostly impacted. The EU oilseed crushing plants rely on canola, sunflower seeds, and soybeans from Ukraine. The lack of supply will likely lead to a significant increase in prices.
Two questions for the wheat market over the next few weeks: will Russia continue to export wheat in quantities equivalent to the past 12 months? Could the Ukraine army retaliate in a similar way and start bombing critical Russian port infrastructure? That would be explosive for prices.
Locally prices continue to firm for canola and grains- although not fully reflecting the large gains offshore. Perhaps we shall see more conviction from the buyers this week.