Russia-Ukraine crisis worsens and causes wheat prices to soar
Feb, 23, 2022 Posted by Gabriel MalheirosWeek 202208
The worsening crisis between Russia and Ukraine made wheat prices soar as of yesterday on the Chicago Stock Exchange. Corn and soybeans prices also increase as an unintended consequence.
Wheat contracts scheduled for May 2022, the most popular as of right now, rose by 6.03% (48.50 cents) at $8.5250 a bushel, making it the highest level since November.
Traders reacted to escalating tensions between Russia and Ukraine after President Vladimir Putin recognized the independence of the Ukrainian regions of Donetsk and Lugansk, controlled by pro-Russian separatists since 2014, prompting the US, UK, and Germany to sanction Russia.
Together, Russia and Ukraine account for 28.5% of global wheat exports, reaching an estimated 206;7 million tonnes in the 2021-2022 crop, according to the latest estimates from the US Department of Agriculture (USDA).
In a report, the German Commerzbank warned that at least 15 million tonnes would be compromised in the event of war. “Such a large quantity could hardly be acquired elsewhere, leading to a significant reduction in stocks in other exporting countries.”
Riding wheat’s upward trend, corn contracts for May 2022 also rose by 3% to $6.7250 a bushel, the highest value since May 2021.
Aside from the two grains being essential in animal feed composition, the crisis caused instability in the energy sector, which boosted oil prices. As a result, corn-based ethanol in the United States became more competitive, contributing to gains in the prices of futures.
Finally, soybeans also followed the trend, and contracts rose 2% to $16,350 a bushel. With such price appreciation, the financial worth of the oilseed approached the same levels in the height of 2021 when the product was worth $16.4250 a bushel.
It is worth noting that the crop failure in southern Brazil, Argentina, and Paraguay remains on the traders’ radar and may also lead to new highs in terms of grain prices.
Source: Valor Econômico
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