Wheat pushes higher as geopolitical tensions rise; soybeans buoyed by oil complex fundamentals

If you’ve been following the markets lately, you’ll have noticed moves in the wheat markets in the past couple of days, driven by geopolitics. But what’s going on with soybeans?

Neil Townsend, chief market analyst with FarmLink marketing solutions, joins RealAg Radio host Shaun Haney to discuss the impacts as Russia starts to make moves into parts of Ukraine and wheat prices rise.

Strictly from a marketing perspective, one of the questions that comes up with some of the current prices we are seeing is whether or not we sell the high.

The key, says Townsend, is acknowledging that we don’t know what the actual outcome is going to be.

“We don’t know how aggressive Putin is going to be beyond what he’s already done. There’s a lot of uncertainty and volatility,” he explains. “I do think you need to risk off when you see a bounce in prices for this, because the one potential out comes is that this is it, this is what he’s done, and he’s going to sort of stop there for awhile.” (Story continues below audio.)

The second outcome is of course if things get further heated, and Russia actually invades. Which as Townsend explains, would mean you sold too early, but it’s hard to hedge your bets on that.

“We can’t lose sight of the absolute importance of Ukraine and Russia in the world wheat trade matrix, the export matrix. They are essential, you absolutely have to have it, and it would be critical if something happened where 25 per cent of the exports couldn’t get through because of hostilities. That would be devastating to a lot of countries and would entail a major shift in business to the European Union, and especially to North America,” Townsend says.

There are comparisons in the market we can look at from the Russia and Crimea situation of 2014, where the final trade was up about $2; however, as Townsend speculates, that situation was materially different.

“I think that one caught people a little bit more by surprise. I also think that the strategic outcome, or the strategic ask that Russia had was more limited. They wanted Crimea, they got Crimea, under the pretense of like, all the people want it to be a part of Russia,” he explains. “It’s a difficult one. It really is.”

“It seems out of step with being in the world in 2022. But then when you start to think about it, and you look at all of the sort of dominoes around the world, it’s not that out of step.”