Farmers in Ukraine are assessing the damage after a recent major dam explosion in the southeastern part of the country, which has been occupied by Russia.
The critical Nova Kakhovka dam and hydroelectric power station sit on the Dnipro River. Ukraine accused Russian forces of blowing up the dam, while Russian officials blame Ukrainian bombardment for it in the contested area.
Its destruction raised anxiety about potential disruption to global grain supplies pushing up some prices around the world. For example, wheat prices surged at one point up 3%.
There are massive agricultural fields in the southern part of Ukraine where that dam burst. The collapse has endangered crops and the country's breadbasket and threatened drinking water supplies, with officials also warning of a looming environmental disaster pointing to oil escaping from the dam machinery and significant flooding.
This comes amid word that Ukraine's ag output is expected to decline by 36% this year, compared to 2021. The estimated costs for the eventual reconstruction of Ukraine's agricultural sector have now reached around $411 billion.
"In the long run, I do believe, though, that the production out of Ukraine, as this war intensifies during the summer, is certainly not going to be what it was," says Chuck Shelby, Risk Management Commodities. "And how much grain gets exported out of the country is going to continue to decline."
EDITOR’S TAKE:
This article speaks to the uncertainty for commodity markets created by the Russia-Ukraine conflict. Because Ukraine is a global supplier of wheat and corn, such massive disruptions caused by the war are bound to impact prices and availability for end users. And even though U.S. farmers have responded by increasing acreages of wheat and corn, if yields are not up to par this harvest, markets could see even more volatility. In the meantime, prices are still above their five-year averages here in the U.S., thus, leading us to predict a very solid year financially for our farmers/ranchers. Make sure you keep actively marketing to all of them in your area. If you’re unsure about how to effectively target these prospects, give Jenni Wallace a call at 980-234-2884, she will be pleased to provide assistance.
