North American crop yields and Russia’s next move could push commodity prices even higher

(Kara Oosterhuis/RealAgriculture)

It’s a global game of chess and it’s Russia’s move.

With ongoing talks of Russia allowing wheat exports to come out of Ukraine, which could mean 50 to 60 million metric tonnes of wheat, those market values have experienced a slight decline over the recent past; however some experts are saying it’s not likely long-lived as we still don’t know the details of Russia’s offer.

Jim McCormick, commodity broker and founding partner of AgMarket.net, says all we know is Russia is going to want some — or all — sanctions lifted, and it is uncertain if those requests will be awarded, this given how the world has responded to the squeeze felt by the energy sector.

“They’re going to want restrictions of some of the sanctions taken off, and I don’t think it’s going to happen. The price of energy is going up for everybody in Canada, in America, no matter where you’re at, it’s going up,” says McCormick. “But, what happened this week, Europe came out and they they squeezed even less energy out of Putin. So he said, hey, we’ll take the the crude via the pipeline, but we’re not going to take any crude by ships. And that serves the oil market up- net gas, heating oil, they are trading higher. So the world’s not backing down the energy front. So my guess is, we’re going to sell off on this belief that something’s actually going to happen. And when it doesn’t happen, we’ll snap back up.”

Ukraine is still sitting on 20-25 million metric tonnes of wheat from last year’s crop that they haven’t been able to export, along with the projected 38-39 million tonnes from this year’s crop – which is approximately 20 million less than a typical year – if they aren’t able to move that out to the world markets, globally, we are looking at a 60 million tonne short, or 80 million when looking at typical output from Ukraine.

When you blend this with the tumultuous year some North American producers are facing, including the very wet spring experienced by Manitoba and the North Dakota, we could see less production there as well. McCormick says the demand sits around 1-1.2 billion metric tonnes and where the numbers sit now as far as potential available product, is somewhere around 700 million, which will no doubt have the potential to drive food prices even higher than what is being experienced right now.

Listen here for the full discussion on the world markets including what this means for the cattle industry: