Commodity Conversations News Monitor

The UN has warned that Russia’s invasion of Ukraine could trigger global famine, as Moscow’s Black Sea blockade delays crucial grain exports, stoking fears of a deepening hunger crisis in countries such as Yemen and Ethiopia.

The crisis is already leading to panic buying in Europe, with shoppers emptying shelves of pasta and flour.

Prices of unsubsidised bread in Egypt have increased by 25 per cent in the last three weeks, provoking hunger and fears of social unrest. Wheat shortages led to unrest in 2008 when the leading chant of the uprising was “Bread, freedom and social justice”.

India hopes to fill some of the global wheat shortage. Exports increased to 6.12 million tonnes last year from 1.12 million tonnes a year earlier. The government recently introduced incentives that could result in 10 million tonnes of wheat exported this season.

The surge in wheat and corn prices is boosting demand for low-grade rice for animal feed in Asia. Chinese buyers are looking to buy extra volumes of broken rice to fatten hogs and other animals. China is meanwhile ramping up corn purchases from the US. China’s Global Times quotes Chinese experts saying that the country’s domestic supply of soybeans is guaranteed despite the events in the international market. The USDA, meanwhile, estimates that China will import a record 100 mln mt of soybeans in 2022/23.

Russia has temporarily banned grain exports to ex-Soviet countries until the end of June – and most sugar exports until the end of August – but will keep providing special export licences to traders within its current quota. The country still has 6 million to 6.5 mln mt of wheat to export under the quota, and the various announcements caused some confusion in the market.

The Russian invasion leaves Ukraine facing its most challenging planting campaign in history, although farmers in the west of the country still hope to increase planted area. Ukraine’s agriculture exporters are turning to barter after multinational traders evacuated their staff and stopped making payments.

Argentina has halted the registration of export sales of soy oil and meal ahead of a likely increase in export taxes.

Indonesia has removed restrictions on palm oil export volumes but has raised the maximum export levy to $375 a tonne, up from $175 per tonne previously.

Fertiliser prices continue to surge, with the Green Markets North American Fertilizer Index hitting a new high. Prices for urea in New Orleans also reached record levels while an index for potash in Brazil rocketed a record 34 per cent.

The massive fertiliser rally has created a rift between the world’s agricultural superpowers over whether Russian supplies should be sanctioned. Brazil argues for keeping crop nutrients sanction-free, while the US prefers increasing the pressure on Russia. Russia accounted for almost a fifth of the world’s fertiliser exports in 2021.

India is boosting fertiliser imports from Canada and Israel to ensure supplies. The country’s fertiliser minister told Reuters, “We need about 30 mln mt of fertilisers, and arrangements are in place.”

An editorial in the Bangkok Post calls for Thailand’s government to reduce its fertiliser dependence and shift to organic farming.

The Canadian fertiliser company Nutrien will boost potash production by about one mln mt in 2022 to 15 mln mt, with most of the additional volume coming in the second half of the year. The company said it couldn’t produce more than that in 2022 — even if the market needed it.

Bayer, a leading seed and crop treatment supplier is considering halting the sale of farming inputs to Russia. The company has already supplied the country for this year.

A new paper argues that parts of the American West may be entering a “perpetual drought.” However, a wetter than usual spring in the northern US Plains and Canadian Prairies could help the wheat crop there. The lingering La Nina may prolong and exacerbate the drought in the US Southern Plains, where the country’s hard red winter wheat is grown. Some 60 per cent of the region is in the grips of drought.

After Europe’s energy traders appealed to governments for financial assistance, Bloomberg has run a series of articles wondering whether rising commodity prices will lead to a financial meltdown. The agency asks whether commodity traders are too big to fall (this blog argues that they are not) and questions whether governments should help traders finance their margin calls. The news agency argues that trading companies should first tap private sources, including their shareholders. A lack of liquidity in the primary commodity markets makes the situation even more challenging.

Ukrainian Prime Minister has urged Nestle to rethink the company’s decision to continue some operations in Russia. Nestle has suspended shipments of non-essential products but is still supplying necessities such as baby and pet food.

Maersk has halted new container bookings to and from Russia but still has vessels calling at Russian ports to deliver containers booked before the invasion and pick up around 50,000 containers stranded in Russia. Maersk’s CEO told Bloomberg that exiting Russia will be “expensive” but makes sense because the country’s economy won’t grow “for a very long time.” He added, “It’s a decision based on morals, but it’s also a financially sound decision in the longer term.”

Maersk has joined the Climate Pledge, an environmental initiative whose signatories commit to fully decarbonise their operations by 2040. Maersk is the first large shipping company to join the programme.

In other company news, Louis Dreyfus has created a new plant proteins business as part of their plans to move further downstream and diversify revenue through more value-added products.

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