Fundamentally Speaking

Wheat arrested a three week slide last week as there are a lot of worries about an imminent invasion of Ukraine by Russia, with not a question of if but when.

NATO is putting extra forces on standby and sending more ships and fighter jets to Eastern Europe while over the weekend the U.S. ordered the families of European embassy personnel in Ukraine to leave.

Both Ukraine and Russia are among the world's largest exporters of barley, corn, and wheat and with few other large-scale suppliers because of weather problems this past season, many importing countries, especially among the Middle-East-North African (MENA) nations are highly dependent on their grain needs from these two nations and any disruption of trade flows would have a very bullish impact on prices.

We have no idea how this situation will play out but as always, markets act first and ask questions later.

As we have mentioned before, Russia and Ukraine along with Argentina and Brazil have become major participants in the world grain trade arena.

This chart shows the share of world wheat exports by Russia and Ukraine on the left-hand axis and their share of corn and barley trade on the right-hand axis over the past ten years with the trend of all six.

With the exception of Russia corn (which is still a small player and its share of world trade has trended lower), both Russia and Ukraine are major wheat and barley exporters and in the case of Ukraine, that way for corn also.

Certainly the case in wheat where Russia is now the world's second largest exporter, having seen its share of world wheat trade more than double over the past ten years with a similar scenario for Ukraine, is now the planet's further largest exporter.

Both countries have seen their share of barley exports increase as they are the number 3 and 4 exporters, while in case of corn, Ukraine is now the third largest exporter in that regard.

Hence a lot of trepidation about what military hostilities between these two nations should they occur would mean for grain trade flows.

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