Russia-Ukraine crisis could hurt Aussie farm inputs
As reported last week on Flow, escalating tensions in areas near the Russia and Ukraine border could spark disastrous price inflations for Aussies.
Dennis Voznesenski, Agricultural Analyst at Rabobank, highlighted on Flow's Friday Country Viewpoint program that unsuspecting Australians could be hit with price spikes in commodities.
“We’ve seen prices go up quite substantially around six per cent since the start of the year, but you compare it to last year it’s already around 24 per cent higher.”
“We’re already in a year with tight supplies, demand was stronger, there were countries in the Middle East and Africa who wanted to sure up supplies to make sure the populations were fed in a year when supply chains were having issues and at the same time there was production issues.”
Mr Voznesenski identified the looming crisis between Russia and Ukraine as a flashpoint for market shocks:
“Now, not only that, but on top of all the other factors were having this possibility of a conflict in the Black Sea between Ukraine and Russia who together produce around 30 per cent of global exports of wheat.”
“They’re also a large barley producer...so it’s quite a big deal if it eventuates, that’s a big if at this point – it might not, but it’s definitely something everyone’s keeping an eye on.”
Voznesenski stated that farmers might be specifically stung by the geopolitical crisis:
“If sanctions come about and they get put on by the West on say, Russia and also Belarus, who’s quite friendly with Russia and where troops are stationed at the moment – together those two countries produce around 30 per cent of the world’s potash.”
“So it is a massive deal if something does eventuate because the world gets quite a bit of its chemicals from that part of the world and if energy prices go up say, in Europe, the cost of producing chemicals even in Europe outside of the Black Sea is going to go up as well.”
Voznesenski also expanded on how domestic commodities were performing when it comes to the immediate interests of farm producers.
“The larger factor domestically at the moment would be the harvest pressure.”
“Speaking to grain traders around the country, they just maintain, we haven’t seen this much, whether it be canola or wheat, there’s just so much of it around that storage is getting filled and farmers are still willing to sell it because margins are quite good.”
Canola prices were another element relating to farming produce that Voznesenski said were being monitored closely.
“Say if we take for example canola, yes right now there is a large amount of supply online in Australia hence its putting pressure on prices.”
“Once we move through that harvest pressure say into mid-February, that harvest pressure might ease and until around April, maybe mid-year, there doesn’t seem to be a reason why there would be downward pressure on prices.”
“By April, we’ll start knowing if the Northern Hemisphere will have decent cropping conditions for canola but there won’t even be new supply on until mid-year, until maybe July.”
“So there’s still quite a decent window between when harvest pressure evens here and new supply comes online in the Northern Hemisphere, where farmers might be able to see some favourable pricing.”