Interview Synopsis

Agriculture Commodities – Supply-demand Overview & 2022 Market Outlook

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The Russia-Ukraine conflict is creating “uncertainty” in the third-most important agricultural producing region in the world, according to an agricultural economist at the University of Illinois.

Russia-Ukraine conflict creates “uncertainty” in agriculture commodities

In an Interview with Third Bridge Forum, the specialist told us Ukraine and areas around the Black Sea are responsible for approximately 3-5% of global trade in corn and wheat, and that they expect a crop reduction in Ukraine as a result of the conflict. 

The specialist told us Brazil and the US would likely increase their corn production to fill this void. We were told further expansion of the safrinha crop and good yields in Brazil would offset “a considerable proportion of any production decline in Ukraine”. However, failure by American and Brazilian farmers to increase production could lead to an increase in the global price of corn. 

Chinese imports of US corn are also likely to decrease as a result of the conflict, the specialist told us, despite a recent uptick in purchases in response to the US-China trade war. The specialist said geopolitics would likely influence China to buy “everything” from Ukraine’s crop next year, pointing to a deal made between China president Xi Jinping and Russia president Vladimir Putin at a summit on the eve of the Winter Olympics. 

Unlike corn and wheat, the specialist doesn’t believe soybeans will be impacted by the conflict, nor were they “particularly bullish” that ethanol prices will increase given there is no direct link with the conflict. 

In other observations, the specialist said corn grown for livestock feed in the US continues to recover but has not yet returned to pre-pandemic levels. The specialist told us increased footfall in restaurants was “critical” to levels rebounding further, but they do not expect numbers to surpass those seen before the pandemic.

Finally, the specialist said the impact of macroeconomics on the farming sector “doesn’t get enough attention”, claiming interest rates can have a “big impact”. While the specialist told us they were not predicting a financial crisis in the agriculture sector, they see “vulnerability” in the market short term.  

To access all the human insights in Third Bridge Forum’s Agriculture Commodities – Supply-demand Overview & 2022 Market Outlook Interview, click here to view the full transcript. 

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The information used in compiling this document has been obtained by Third Bridge from experts participating in Forum Interviews. Third Bridge does not warrant the accuracy of the information and has not independently verified it. It should not be regarded as a trade recommendation or form the basis of any investment decision.

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