Return to Insights

Three things to watch as the Ukrainian invasion unfolds

Marc Schober Profile Picture

As Russia’s invasion of Ukraine continues, the U.S. and NATO allies have imposed heavy sanctions against Russia, aimed to cause severe economic impacts that will jeopardize the country’s ability to raise capital to fund its aggression and influence its future actions.

What may seem like an isolated conflict between two countries has far-reaching consequences, especially in agriculture. The conflict will exacerbate many of the issues already caused by the ongoing pandemic, including supply chain issues, rising energy prices and transportation costs.


Ukraine and Russia have a long history and share linguistic and cultural similarities. Ukraine, once a member of the Soviet Union, separated from Russia in 1991. Tensions between Europe’s two biggest countries has risen over the past two decades.

In 2014, Russia, backed by pro-Russian separatists, invaded Ukraine and annexed the Crimean Peninsula. Recently, Ukrainian president Volodymyr Zelensky has talked openly about wanting to join NATO, an opinion that is popular among Ukrainian citizens, an effort that Putin has openly disagreed with.

Ukraine’s agricultural importance

Ukraine is the second largest country in Europe, just behind Russia, and is roughly the size of Texas. The weather allows farmers to plant both winter and spring crops. More than two-thirds of all land in Ukraine is classified as agricultural land. Corn, wheat and barley are Ukraine’s main grain crops. Ukraine is also a major player in sunflower and soybeans. To put in perspective, Ukraine is responsible for 16% of world corn exports and 12% of world wheat exports.

What to watch for in the markets

Any conflict is going to affect the financial markets in both the short and mid-term. Given Ukraine’s status as the breadbasket of Europe, any conflict in the region is going to affect agriculture and commodity markets. If Ukrainian farmers are unable to plant, we could see substantial price increases for these crops in 2022 and beyond. Sanctions on Russia and Belarus (a Russian ally) will restrict the U.S. and its allies from importing Russian crops leading to even bigger swings in prices. Ukraine and Russia are responsible for 29% of the world’s wheat exports.

Commodity prices

With 29% of the world’s most popular grain involved in a conflict, commodity prices, especially grains and oilseeds are going to be volatile. For U.S. farmers, prices are likely going to rise in the short time. According to Arlan Suderman, Chief Commodities Economist with StoneX Financial, “If you’re a producer and you’re looking at some of these prices and you think maybe I should price grain for the next year or two on this, remember what’s happening to input prices as well. See what you can do to lock in both. At the same time, many producers may not be big enough to be able to do that with derivatives. So, talk to your suppliers, maybe they can combine positions and help prevent some protection positions to protect input costs going forward at the same time you’re locking in prices.” Farmers will also likely see price spikes on futures contracts for the next 3 to 6 months. What remains to be seen is how long this conflict lasts. Farmers will need to be conscious of commodity prices over the next few months and into 2023. We will likely see prices spike, but hedging against price drops as things return to normal will also be critical.

Input prices

Input prices are another area to watch. Besides being a major player in wheat, Ukraine, Russia and Belarus are also important for fertilizer. Russia is responsible for 21% of anhydrous ammonia exports and combined with Belarus, their combined exports for potash is 40%. While much of this fertilizer is for Europe, future sanctions could result in further fertilizer prices increases. Ukraine is home to multiple ports that ship said fertilizer.

Private sector geopolitical decisions may also affect farm input costs if any of the large input manufacturers or processors are affected by sanctions. Most U.S. farmers have already purchased this year’s fertilizer but could see further prices increases for the 2023 growing season. Farmers will want to keep an eye on fertilizer prices and be mindful of volatile prices when purchasing.

Fossil fuel prices

Again, sanctions would play a large role in oil prices. Russia is responsible for 16% of the world’s natural gas production and 11% of crude oil exports. We will likely see crude oil and natural gas price increases as sanctions would forbid purchasing oil from Russia. The U.S. and OPEC could tap into reserves to keep prices from rising too high. Oil price increases would also impact transportation costs driving up prices on virtually everything.

Monitoring the situation moving forward

Currently, the future is clear as mud and this situation is changing daily. There are few things to watch that could make things worse. First, sanctions will play the biggest role. Relations between Russia, China and Brazil could have a big impact on commodity prices due to Brazil’s large volume of soybean exports, the largest in the world. China sits in an awkward spot as it has shown support to Putin, and may formally side with Russia, yet buys a lot of corn and wheat from Ukraine. One-third of China’s corn comes from Ukraine and it’s used to feed the world’s largest hog herd. If China formally sides with Russia, it risks being sanctioned.

If the situation escalates and becomes more violent, look for logistics to be halted in the region. With Russia having control of Crimea and advancing on the Port of Odessa, exports could be halted. If the port is destroyed it would further limit transportation and exports in and out. Many shipping companies are avoiding Russia’s and Ukraine’s ports due to high insurance costs. Due to the conflict many insurance and trade organizations now require shipping companies to notify underwriters if they have planned voyages to the area. With 90 percent of Ukraine’s grain exports transported by sea, port closures will cause prices to spike.

It’s also important to think about the people you do business with. Given the current sanctions, banks are not allowed to send wire transfers to Russia. As the U.S. and its allies impose sanctions, look for further financial restrictions.

Lastly, the big kicker here is how long the conflict lasts. Ukrainian farmers are about two to three weeks out from planting. If the situation escalates or continues and they are not able to plant, we will see Ukraine’s grain exports drop which will increase prices. The advice here is simply to keep an eye as the situation is fluid.

Marc Schober Profile Picture

About Marc Schober

Signaling deepened investment in its agriculture and agribusiness customers, Bremer Bank named T. Marc Schober to a newly created Director of Specialized Agriculture Solutions position in 2019. In this strategic role, Marc is responsible for identifying opportunities, services and solutions to serve Bremer’s agriculture customers in new and better ways. Marc’s expertise in agriculture and agribusiness from numerous perspectives is unique and offers an incredibly valuable insight for our customers. Marc's agriculture connections reach all the way back to southeastern Wisconsin, where he grew up on a small family farm. In addition to working as...

More on Marc