War in Ukraine upends global ag markets as Minnesota farmers prepare for new crop

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Russia’s invasion of Ukraine final week has sparked turmoil in agricultural markets simply as Minnesota farmers put together for this spring’s planting.

The farmers see alternative but additionally financial hazard — and a whole lot of uncertainty.

Costs for corn and soybeans have returned to the highs of final spring and summer time, a stage not seen in seven to eight years. Wheat costs have soared as worries rose about provide. Russia and Ukraine collectively account for practically one-third of world wheat exports.

On the similar time, farmers are being pinched by gas costs not seen in a number of years — partly a results of the Ukraine disaster — coupled with dramatically escalating fertilizer costs. And the rising value of grain, a key element of animal feed, hurts Minnesota’s livestock farmers.

“There are not any free rides right here,” stated Michael Swanson, Wells Fargo’s chief agricultural economist.

Plus, any sustained grain value will increase will put extra strain on already fast-rising meals costs. In January, U.S. meals costs climbed greater than 6%, the biggest year-over-year enhance since 1982, the federal Client Worth Index confirmed.

Russia’s invasion of Ukraine might have longer-term penalties on agricultural markets.

“This can be a very severe struggle,” Swanson stated. “This isn’t only a skirmish.”

For ag markets, the length of the battle and the way a lot financial upheaval comes with it are the massive questions, stated Invoice Moore, Lakeville-based chief danger officer for Compeer Monetary, a cooperatively owned agricultural lender.

To date, western nations have not slapped sanctions on Russian grain exports, however that would change. If the preventing lasts solely a short while, Ukrainian farmers might no less than get their crops planted this spring.

However the longer the navy battle, the larger the danger.

“What Ukrainian farmer goes to exit and plow their area on the danger of getting hit by a missile?” Moore stated.

Swanson stated the window for planting this yr’s crop in Ukraine might be “drastically diminished. I might suspect shedding a crop yr in Ukraine may be very excessive proper now.”

Ukraine is among the world’s largest exporters of wheat and corn. If Ukraine’s corn crop is stunted by struggle, it is not going to solely push up costs however depart a gap within the worldwide market, one which may nicely be stuffed by U.S. farmers.

America is the world’s largest corn grower. Solely this nation and Brazil have the acreage and export services to considerably make up for misplaced Ukrainian corn output, Swanson stated.

And Minnesota is among the nation’s largest corn-producing states. Farmers within the state planted about 8.5 million acres of corn final yr, with soybean acreage shut behind, federal information present.

Nonetheless, the Ukraine impact on this yr’s corn market is extremely unsure, stated Bryan Biegler, a corn and soybean farmer in Lake Wilson, Minn., and president of the Minnesota Corn Growers Affiliation.

“We’re form of simply sitting and ready to see what is going to occur,” he stated.

Many Minnesota farmers plant each corn and soybeans, and 2021 was the most effective yr for each in no less than seven years. Corn topped $7.50 a bushel and stayed above $6 — significantly increased than costs since 2013 — earlier than falling again some in late July.

Corn started rallying once more in late December as demand remained excessive whereas dry climate started weighing on Brazil’s corn crop. Corn briefly topped $7 a bushel final week and stays just under that mark.

Soybean costs additionally hit multiyear highs in 2021 for a number of the similar causes as corn. In addition they jumped final week, topping $16 a bushel and hitting a nine-year excessive — although neither Ukraine or Russia are main soybean exporters,

Corn and soybean costs “form of observe one another,” Biegler stated.

Wheat costs have usually shot as much as ranges not seen in 9 years, although the futures value Friday for exhausting pink spring — the variability grown in Minnesota — was about the identical because it was in November.

Wheat is dwarfed by corn and soybeans in Minnesota, with about 1.2 million acres of exhausting pink spring planted final yr.

Corn and soybeans are merely extra worthwhile than wheat. So when farmers have the selection, as they do in a lot of Minnesota exterior the far northwestern counties, they go for corn or soybeans.

And even increased wheat costs might not result in considerably extra wheat acreage this yr in Minnesota.

“It would push some to plant a bit extra wheat, however proper now, it is exhausting to inform,” stated Mike Gunderson, president of the Minnesota Affiliation of Wheat Growers. He farms wheat, corn and soybeans and raises livestock close to the northwestern Minnesota city of Bejou.

“It isn’t simply wheat that’s rallying, it is corn and soybeans, too,” he stated. So, wheat farmers who increase different crops have simply as a lot of an incentive to plant them.

Plus, wheat is a extra really international crop than corn and soybeans, so there are a number of international locations that would fill any hole created by the Ukraine struggle.

“It looks like everybody on the earth can develop wheat,” Gunderson stated.

Whereas crop costs are comparatively excessive, farmers like Gunderson are wrestling with hovering enter prices.

“Gas is manner increased than a yr in the past and fertilizer is astronomically increased,” he stated.

Those self same excessive oil and pure gasoline costs which can be denting shoppers’ motor gas and heating budgets are consuming away at farmers’ pocketbooks, too — assume tractors and different farm tools.

Corn notably sucks up fertilizer. And fertilizer prices are about $345 per acre proper now, up from $143 in 2020, stated Compeer’s Moore. Most farmers put down fertilizer after final fall’s harvest, or they purchased the stuff in 2021 for spring functions.

However fertilizer prices have been already excessive final fall, about $225 per acre, Moore stated. Provide chain bottlenecks and normal inflation have pushed up costs. So have climbing prices for pure gasoline, an enormous a part of nitrogen fertilizer manufacturing.

The market might get uglier.

Russia is among the largest fertilizer producers on the earth. To date, western governments have not sanctioned Russian fertilizer.

“Sanctions would completely have an effect on fertilizer pricing for this fall,” Moore stated.