Ukraine Crisis Commodity Option Opportunities

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Ukraine Crisis Commodity Option Opportunities
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Ukraine Accounts for Nearly 50% of Sunflower Product Exports

According to the US Farm Bureau Federation, Ukraine has accounted for 47% of the world’s exports of sunflower seeds and oils. Sunflower oil futures are running at about twice normal levels. Spring planting for sunflowers happens in Ukraine from the first of April to the end of May and the harvest runs from the start of September to the end of October. The war in Ukraine affects sunflower production in several ways. Many Ukrainian farmers have taken up arms to fight Russians. About 10 million Ukrainians out of a population of 40 million are internally displaced while more than 3 million have left the country. Sunflower growing is located in areas where Russians control the country or where there is fighting. If there is no fighting on a farmer’s land the farmer will need to find fertilizer which may usually come from Russia as well as fuel that also comes from the invader. Farm workers may be busy shooting Russians and, if there is a successful harvest, getting sunflower seeds to a processor and getting sunflower seed oil to the port of Odessa will be difficult if not impossible. Then, there is the issue of Russia controlling the Black Sea and access to the Dardanelles to get the Mediterranean Sea.

Ukraine Accounts for Nearly 50% of Sunflower Product Exports
Russian Occupation Ukraine End of March 2022
Ukraine Crisis Commodity Option Opportunities
Sunflower Production Ukraine

When Will a Shortfall in Ukraine Agricultural Production Make a Difference?

The commodity futures market, like the stock and options markets, looks to the future. Food shortages in countries like Bangladesh, Turkey, Yemen, Indonesia, and Sudan which depend on Ukraine for wheat imports will begin in the fall of 2022 if there is a wholesale failure of the wheat harvest. Planting for wheat is not an issue this year as winter wheat is planted in Ukraine in September and October and harvested in July and August much as happens in North Dakota and Manitoba. Ukraine is a major corn producer although not on the level of sunflowers and planting will be affected on the same time scale and for the same reasons as with sunflowers. The corn harvest, much like in the US Great Plains, can go on into late November and December providing that an early snowfall does not interfere. Ukraine is the 4 thleading corn exporter and covers 13% of world exports. The market sees the problems now but the world will experience shortfalls on the same time frame as wheat when countries in Africa and Asia run short late in 2022.

What Factors Will Affect Ukraine-related Commodity Prices?

Ukraine appears to have slowed, halted, and reversed the advances of Russian troops depending on which area of Ukraine you are looking at. Because winter wheat was planted last fall there is time for the war to settle down and for a ceasefire to allow for a fall harvest similar to a normal year. The situation is worse for corn, sunflowers, barley, millet, and other crops as farmers should be in the fields soon to plant and then fertilize and cultivate. If Putin, with his back to the wall, resorts to further extreme measures like biological, chemical, or nuclear weapons and the war gets further out of hand we can expect both more trouble in the near term and a widespread food shortages in countries like Turkey, Indonesia, Bangladesh, Sudan, and others with commensurate price dislocation in corn, wheat, and sunflower product futures.

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CEO TOPGUN Options, chairman & founder No Fallen Heroes Foundation, ONN.tv founder and CEO, Former F/A-18 USN fighter pilot, TOPGUN (adv) graduate. Father of 3.

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Matthew "Whiz" Buckley

Matthew "Whiz" Buckley

CEO TOPGUN Options, chairman & founder No Fallen Heroes Foundation, ONN.tv founder and CEO, Former F/A-18 USN fighter pilot, TOPGUN (adv) graduate. Father of 3.