Ukraine crisis: Agri commodities prices plunge in global markets as supply fears recede


Prices of agricultural commodities, particularly wheat, maize, soyabean and palm oil, dropped significantly in the global market during the weekend, after having surged on February 24 when Russia ordered its troops into Ukraine. 

The rates of most of these commodities dropped by over five per cent as members of the North Atlantic Treaty Organization (NATO) led by the US and other nations critical of Moscow’s action have not come up with any decision that will affect the movement of foodgrains such as maize, wheat and sunflower. 

In a way, fears over the supply of these commodities have receded, said traders.

Crude oil impact

The easing of crude oil prices, particularly benchmark Brent, below $100 a barrel has also helped the prices to ease. 

On February 24 when Russia announced that it was ordering its troops into Ukraine, prices of wheat and maize soared by over nine per cent, while rates of palm oil in spot trading skyrocketed above 7,000 Malaysian ringgit a tonne. 

On Friday, benchmark soyabean futures closed nearly four per cent lower at $15.96 a bushel (₹44,025 a tonne) on the Chicago Board of Trade (CBOT). 

Wheat benchmark futures pared 8.26 per cent of their gains from the previous day to end at $8.495 a bushel (₹320 a tonne) on the CBOT. However, prices continue to hover at a nine-year high. 

Maize futures shed 5.22 per cent of their gains from February 24 on the CBOT to close at $6.587 a bushel (₹19,450 a tonne). At one point of time soon after Russian President Vladimir Putin’s announcement, the commodity had hit an eight-month high of $7.16 before slipping below $7 a bushel.

Bio-diesel demand

Palm oil spot prices which had topped 7,000 MYR on February 24 slipped lower during the weekend to 6,732 MYR a tonne. Importantly, the benchmark May futures dropped below 6,000 MYR to 5,984 MYR. 

March contracts of canola, a variety of rapeseed, slid by over five per cent to $1,008.10 a tonne on the Intercontinental Exchange during the weekend. 

Palm oil and canola prices soared for two reasons. One, fears gripped the market that supplies of sunflower oil from Ukraine, the primary supplier, might be affected. Two, both these oils are diverted for the production of bio-diesel whenever crude oil prices surge to around $100 a barrel. 

Wheat and maize prices also skyrocketed on fears that their supply from Russia and Ukraine, both major exporters in the global market, could be affected. 

The fears are on two fronts. The first is that Russia may prevent exports of these commodities from Ukraine and the second is that any sanctions by NATO and its allies could affect Russian shipments to the global market.

Moscow, Kyiv global exports share

Even prices of barley jumped as Russia (4.96 million tonnes or mt) and Ukraine (5.04 mt) make up over 40 per cent of supply in the global market. 

In the case of sunflower oil, Ukraine (6.86 mt) and Russia (3.2) almost make up the entire global supply of 11.24 mt. Again Moscow (37.26 mt) and Kyiv (18.05 mt) contribute over 25 per cent of exports in the world wheat market. 

As regards maize, both these nations (Russia 2.28 mt and Ukraine 27.95 mt) have been shipping out nearly 10 per cent of the 305.54 mt global exports. 

India an export source 

The rise in the prices of these commodities has benefitted Indian farmers to some extent. Prices ran up when the tension was building up between Moscow and Kyiv before peaking on the day of Putin’s announcement. Rates dropped a tad during the weekend, though. 

This is because India is seen as a source that can meet short-term needs and can supply in small quantities for such immediate requirements. In particular, it can meet the needs of nations in South Asia, South-East Asia and West Asia besides Africa. 

Other advantages that New Delhi enjoys are price competitiveness and ample stocks in the country boosted by record production of these grains. 

Oil imports turn costly

On the other hand, oilseeds prices have also gained since imports of oils such as palm, soyabean and sunflower could now be a costly proposition. 

The impact of the Ukraine crisis on the global market reflected in the domestic agricultural markets too. Prices of wheat topped ₹2,000 a quintal with Madhya Pradesh accounting for the highest arrival of 63,713 tonnes last week. 

Maize prices are ruling near ₹1,900 a quintal with Madhya Pradesh again accounting for most of the arrivals (19,043). Soyabean prices are ruling firmly above ₹6,000 a quintal across various agricultural markets, while mustard rates are also firm around these levels. ‘

Maharashtra and Madhya Pradesh accounted for over 90 per cent of soyabean arrivals last week, while arrivals from Rajasthan, Madhya Pradesh and Gujarat made up over 80 per cent. 

Published on

February 27, 2022


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