Market Morsel: Russia and Ukraine conflict?
This article was previously written in April 2021, at a prior time of tensions between Russia and Ukraine. As tensions are flaring again, I thought it was worthwhile reposting to ensure those that missed it the first time around can read about what the impacts were of the last conflict in that part of the world.
There have been worrying new reports in recent weeks about the mobilisation of Russian troops on the Ukrainian/Russian border. This is concerning due to the potential for escalation, and we hope that this doesn’t occur.
However, it’s not the first time that we have seen conflict in the region; it was only in 2014 that war erupted between Russia and Ukraine.
Any impact of a conflict on grain pricing is entirely hypothetical, as it would depend on the severity of any action. We can look back at what happened to price during the period of the last Crimean conflict.
The scuffle between Russian backed forces and Ukraine was centred mainly around Crimea and Donbas, which has continued from February 2014 to the present day.
I recall the vast amount of uncertainty as shells started falling, as this was a huge event, and there were concerns that it would cause massive issues shipping grain from the worlds no1 export region.
March was when the conflict took shape, and this was the primary reason for a 14% gain for the month (+4% for Feb). This provided farmers in Australia with an opportunity to price grain for the following harvest (or old crop) at decent levels.
In the end, the skirmish in 2014 resulted in minimal disruption to the supply chain. This result was the risk premium eroding.
Hopefully, there is no conflict between Russia and Ukraine, as conflict with the potential for escalation is not something the world needs, now or anytime.