From Texas Standard:
Texas farmers are already feeling the ripple effects of the Russian invasion of Ukraine.
Shortly after the start of the conflict, prices jumped for crops that Ukraine exports, such as corn and wheat.
That could create an opportunity for Texas growers, according to Luis Ribera, a professor of agricultural economics at Texas A&M University. He spoke to Texas Standard about what this means for farmers and consumers. Listen to an interview with Ribera in the audio player above or read the transcript below.
This interview has been lightly edited for clarity.
Texas Standard: Russia’s invasion of Ukraine is only a few days old, but what effects have you seen on commodity prices?
Luis Ribera: Definitely more volatility on prices, even if they are down a bit today. But yesterday they reacted to the invasion: wheat and corn prices went up, oil prices went up too. Now they’re down a bit, but oil is still close to $100 a barrel, so it’s still uncertain, and that’s what the markets are reflecting. They don’t know what’s going to happen, so there’s a lot more ups and downs.
What might it mean for farmers in Texas if there was less food or more expensive food, depending on how markets change?
Again, it comes down to uncertainty. Russia and Ukraine are not important markets; they were. Russia represented for us a market of approximately 1.5 to 1.6 billion dollars. But that was before 2014. And you will remember that in 2014, that’s when Russia invaded Crimea, so from then on, exports to Russia went down. We imposed sanctions on Russia, and Russia stopped importing American agricultural products. So we went from a market of about $1.6 to $1.7 billion to a market of about $250 to $300 million.
Today, Russia is about the 50th country we export in terms of value, and Ukraine is about 80th. So they haven’t been a big market for us at the moment. But they produce a lot of agricultural products, mainly wheat. So that means wheat prices are more volatile, but there are opportunities for US wheat and Texas wheat to find markets that were previously Russia and Ukraine markets.
When you see commodity prices go up like that, what do you do as a farmer? Do you start planting corn and wheat and hope the uncertainty will eventually pay dividends?
Again, you know, it’s just reacting to the news. And I think if you look at the futures market for these commodities, try to enter into futures contracts and try to price a percentage of your production just to make sure you’ve got some locked in and then figure out what’s going happen.
Do you anticipate we will see more wheat and corn grown in Texas this season as a direct result of this conflict?
May be. But you have to look at the overall picture. When you look at all the commodity prices, when you look at soybeans, for example, over $16 a bushel; when you look at corn, when you look at cotton, for example, which is very important in Texas, $1.20, $1.22, they compete for acreage with other crops. So you have to look at the big picture and see what your competitive and comparative advantages are.
Here in Texas, I think we’re going to see a lot more cotton because the price of cotton right now is really, really good. It could take acreage of wheat, it could take acreage of other things like corn, which we don’t produce a lot. But you have to look at the overall picture.
Part of this bigger picture includes the price of inputs like oil and fertilizer, and these are also rising. Will this affect farmers who are trying to take advantage of short-term gains from higher commodity prices?
Yes definitely. You are quite right. Prices are great, but at the same time input prices are also rising, from fertilizers to Roundup. This is therefore going to play a major role in what the portfolio of commodity producers decides to produce this year.
What do you see as long term effects here?
It’s really unknown. We really don’t know what Russia’s intention is in the short and long term, but I see opportunities. I see a lot more uncertainty and volatility, but I see opportunities for US producers to try to capture a bigger share of the international agricultural commodity market.
Do you see food prices for ordinary Texans rising as a result?
Yes, but it will be really difficult to determine which part of this is inflation and which part is war. Right now we are coming out of very high inflation. We don’t know if this will continue or if it will end in 2022. But again, just starting a war always adds uncertainty, and separating the two will be very difficult to do at this point. .
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