Invasion of Ukraine ripples through the agricultural economy

Russia’s invasion of Ukraine is affecting Howard Darls’ business. It also hurt his friend.

The small farm equipment manufacturer he runs in Fargo, North Dakota has 75 employees in Ukraine and Russia since 1991.

“In 93 trips, about $ 350 million of machines (sold) came into the market, so I got to know a lot of people, and when I read a text from a friend, I cried. Will come out, “says Dahl.

Many of Dar’s friends and colleagues live in Kyiv. He also chairs the board of directors of Asstarta, the country’s largest sugar company, which manages more than 500,000 acres of Ukrainian farmland. The company is based in the Ukrainian capital, where Dahl is in constant contact with his friends.

“There is still food left in the supermarket, but if the city is surrounded by Russian troops and they try to stop the invasion of food, it is a long siege, which can be very, very difficult.” He said.

Amity Technology, a Dahls company, currently sells sugar beet devices in Ukraine and Russia. He has one employee in Ukraine and several employees in Russia.

Some containers of farm tools that his company recently shipped to the area have been returned, and Fargo’s company has more orders and is currently awaiting uncertain delivery times.

“Here it affects us”

Ukraine produces and exports many wheats, corn and sunflowers. Agricultural production has increased significantly over the last 20 years. Ukraine and Russia together export about one-third of the world’s wheat.

Based in Minnesota, Cargill is one of the companies that moves its grain around the world. However, now the ports are closed and their exports are stagnant. Cargill declined the interview request. The company has infrastructure in Ukraine and its cargo ship is reportedly damaged early in the conflict.

The closed Ukrainian port was forced by many ships heading there to pick up grain and turn back. It upset the balance of the international market.

“What does that mean if you buy wheat from Ukraine and deliver it in 6 weeks? That means you don’t see the amount of grain you expected to receive in 6 weeks.” Frayne Olson, a crop economist at North Dakota State University, said, “So I suddenly panic and look around. How can I relocate it?”

Those traders had to find grain elsewhere to meet their orders, which caused extreme market volatility, especially for wheat.

“We can’t minimize how important both Ukraine and Russia are in the global wheat market,” said Edward Useto, a grain market economist at the University of Minnesota. It’s basic food and basic. It’s the main food. “

Usset said that much of the Ukrainian grain goes to Europe and the Middle East, but the impact will still be felt in the Midwest.

“You may think” Ukraine sells a lot of wheat. Well, they don’t sell to us, it doesn’t affect us, “Usset said. “Well, that affects us. Of course, yes. These commodity markets are all over the world. If we disrupt the wheat market in half of the world, it affects us here.”

Ag economists are trying to understand how these effects will be exerted in the still intensifying war and global sanctions on Russia.

“There is a reaction to every action. The difficult part of economics is trying to understand what the reaction will be,” Olson said. “How do you make short-term or long-term adjustments to compensate for these disruptions and changes in product flow? And think about all of them in advance. , Really, really tricky. “

Agriculture is a global system that is constantly adjusted to the changing weather and political conditions around the world. Now we need to deal with new levels of risk.

William Wilson, a prominent professor at North Dakota State University, said: CHS Chair of Risk Management and Transactions.

“I don’t think there is a risk of not planting in the spring, as invasion could occur and all Ukrainian ports could be closed within the crop planning budget,” Wilson said. “I don’t think everyone had it within the scope of the plan.”

As the situation in Ukraine evolves, there may be winners and losers in the international ag market. Unstable markets are usually good for grain traders, and Wilson said they are likely to benefit from this global turmoil.

Food companies and consumers will be hit by higher costs.

Farmers will benefit from rising crop prices, as markets have already risen due to drought and rising renewable fuels, Wilson said. But conflict also means soaring costs for fuel and fertilizer farmers to plant crops this spring.

Rising grain prices also push up feed costs for livestock farmers.

Usset says crop farmers here are unlikely to make major changes to this year’s planting as they are waiting for what will happen in Ukraine, but if global turmoil continues, it will be long-term. Changes can occur.

North Dakota was ranked second in the state for wheat production last year, and Minnesota was ranked ninth. Every year, billions of dollars worth of crops are exported from the region.

Ukrainian farmers are planting spring crops almost at the same time as the farmers here. The agricultural industry is watching to see if the crops that the global market depends on will be planted.

“You have to settle the war. You need to get the road back. You need to get the ag input to the farm. You have to get the farmers back to the farm. They are crops. Must be planted. It can happen a lot, “Wilson said.

Whatever happens to Ukraine in the short term, Dahl sees spring planting as an inflection with potential ripples that go far beyond combat.

The crippled Ukrainian agricultural industry will hurt Dars’ business in Fargo. But for now, he is more worried about his friends fighting to survive in Kyiv.