What the War Means for Grain Prices & Supply

We've been asked to take a stand on the war in Ukraine. We thought we would bring our own twist to the discussion in how it relates to our field. Here is a quick resume on grain exports:

Ukraine:

• 1st sunflower seed and oil exporter with 30% of world's supply.
• 3rd wheat exporter with 12% of world's supply.
• 4th corn exporter with 17% of world's supply.

Russia:

• 1st wheat exporter with 17% of world's supply.
• 2nd sunflower seed and oil exporter with 27% of world's supply.
• Minor corn exporter with 1% of world's supply.

So with a combined (29% wheat, 57% sunflower, 18% corn) of the world's grain exports, this conflict presents an enormous logistical nightmare. In Russia, we are faced with an immediate problem of embargoes on exports (we stand with Ukraine) and a conscript problem. Russia's army is in majority not a standing one, but a conscript one. Meaning that workers (farmers, factory workers, etc.) are forced into military service. This impacts production as farms and factories are left empty. Russia has not yet fully conscripted its army, so this issue is not yet fully problematic, yet. Ukraine presents a much larger problem. Warehouses, transformation facilities and farms are being destroyed, crippling the supply chain. The biggest issue remains that there are no farmers left to sow the field in the coming weeks. This will be disastrous come fall 2022 because we will have no crops to harvest even if the war is over. This will leave the market empty until fall 2023.

In Canada, we do not buy grain from Ukraine and Russia, as we are pretty self-sustained with our prairie provinces and mid-western states to the south. This might prompt some people to be dazzled at exploding grain prices. The answer is pretty simple, Europe and China are buying all our grain. We are seeing a major increase in exports as markets in Europe and China are buying all our grain to compensate. This is driving prices up, as we are expecting 300% or more price increases in wheat and corn. Sunflower oil is a complete disaster. We heavily import sunflower oil from Ukraine as it is a good overall oil for so many purposes. We are expecting shortages in the coming weeks, with no supply until late 2023. Furthermore, we ourselves have only about 2500L left and no hopes of importing more. As shortages hit, manufactures are going to switch their recipes over to canola oil, which is very similar. We are not expecting shortages in the short term, as we produce about 76% of world's supply right here in Canada. Prices are going to skyrocket for canola oil though as foreign markets (Europe and China) horde Canadian canola to offset their sunflower oil deficit.

To conclude, we are seeing a hoarding trend from Europe and China at an unprecedented scale. Panic is pushing manufactures to secure their yearly supply right now before the shortages hit. Fuel prices are affecting transport prices, even on a local scale shipping is getting more and more expensive.

Sunflower Oil:

• Buy now or switch to canola until stabilization in Fall 2023.

Wheat:

• Buy now, prices are to continue rising until stabilization in Fall 2023.

Corn:

• Buy now, prices are to continue rising until stabilization in Fall 2023.

Freight Costs:

• Momentary price hike which is unpredictable in the near future. Ban on Russian oil is the driving factor.

Ukraine needs our help. We encourage you to donate to the Canadian Red Cross https://www.redcross.ca/