Fighting In Ukraine Could Mean Profit for U.S. Wheat Farmers

Sep 3, 2014

The ongoing turmoil in Ukraine could impact the world’s wheat supply and with reports that fighting is edging closer to a key Black Sea trading port, farmers and commodity brokers are paying attention.

Pro-Russian rebels appear to be pushing closer to the Ukranian city of Mariupol, a strategic port city. As Ukraine is one of the world’s largest exporters of wheat, any disruption in the harvest or transport of the country’s wheat crop could put a kink in global supply lines and could raise grain prices across the world.

Daniel O’Brien, an agricultural economist at Kansas State University, says that could benefit U.S. farmers. Particularly farmers of Hard Red Winter Wheat, which is often used in bread and grown primarily in Texas, Oklahoma, Kansas, Nebraska, Colorado and the Dakotas.

“To the degree that there would be military conflict – anything that would disrupt shipping coming through that area – then you have a bottleneck and less availability of wheat supplies for the rest of the world to buy,” O’Brien said.

Both the U.S. and Ukraine are major exporters of wheat. The U.S. exported 32 million metric tons of wheat in the 2013-14 marketing year,according to USDA estimates. Ukraine exported nearly 10 million metric tons in that marketing year, putting it behind only the U.S., the European Union, Canada, Australia, and Russia in world wheat exports.

Among wheat buyers, there is also the fear that economic sanctions could be imposed on Russia and could target Russian agricultural exports like wheat. That would further crimp supplies and even fears of additional sanctions would likely drive prices up.

“There is the potential to see stronger prices than we would otherwise have anticipated mainly because of the demand pull that would come from export buyers having to look elsewhere for wheat supplies for food consumption,” O’Brien said.

Wheat prices on the global market have yet to jump as a result of the fighting in Ukraine, but some are even viewing wheat prices as a barometer for the tension in the region.

Ukraine would usually ship off its wheat supply in late summer, so O’Brien expects to know more over the next few weeks.