Taking an environmentally sensitive approach to pest management


Ben Brown
University of Missouri
Division of Applied Social Sciences

Black Sea Agriculture- Thoughts for US Agriculture

Ben Brown
University of Missouri

March 7, 2022

minute read

Like many- I continue to watch in horror as Russia's Ukrainian invasion continues some 5,500 miles around the world. When conflict is at a distance it can be difficult to comprehend current disruptions and future impacts, but the impacts are being felt right here in the US. Through international exchange trips I have gotten to know several Ukrainian producers who, like my own parents, work hard year-round to raise their crops and a family while battling uncertain weather, price volatility, and changes in regulations. I cannot imagine what farming is like when a war breaks out in your wheat field. This article is not comprehensive, but the intention is to: 1. Educate about agriculture in the Black Sea region; 2. Translate that to US production and consumption impacts; and 3. Provide farm management considerations.

European Breadbasket

The US Midwest is often referred as the Breadbasket of the Nation- a noble complement received thanks to a concentration of deep fertile soils suitable for crop growth. Soil pockets like those found in the heartland can also be found in northern Argentina and the Black Sea Region in Europe. Like North Dakota- warmer springs, later frosts, and increases in seed genetics have opened these soil pockets for agrarian expansion. The Black Sea region including, Ukraine, Russia, Turkey, Romania, Bulgaria, and Georgia. Ukraine and Russia account for roughly 28%, 19%, 78%, 8%, and 13% of global wheat, corn, sunflower oil, crude oil, and fertilizer exports, respectively and make up the European Breadbasket. Ukraine's, planting, crop development and harvest would be similar to North Dakota here in the US. The wheat they grow is predominantly hard winter wheat (bread wheat) and durum wheat used for pasta. Heading into the 2022 crop year, producers across the world were facing strong demand, short supplies, and decreased stocks for feed grains like wheat, corn, barley, and grain sorghum. The disruption of trade out of the European Breadbasket has decreased prices within the region while sharply increasing prices for the rest of the world. Ocean freight rates and insurance premiums have significantly increased leaving many importing countries like Egypt, war torn Yemen, and other African countries dependent on food products out of the region looking for alternative suppliers- often at much higher prices. Commodity prices in the US will remain extremely volatile as the conflict in Ukraine some 5,500 miles away unfolds.

Domestic Food Prices

Anytime there are major disruptions in the world whether it be weather, like a drought in South America, biological, like the outbreak of an infectious disease, or geopolitical, like the current conflict in Ukraine, two questions quickly arise: 1. How will this impact food prices? and 2. What does this do to farm income? In a simplistic answer: food prices have gone up already and likely will go up more in the short-term.

Food is a refined good with several inputs like raw commodities, labor, packaging, transportation, and marketing. Many consumers are often surprised how small the percentage of the food dollar returned to producers is - roughly 14%- and many producers often underestimate how much value is added post farm gate. Over the last two years disposable income is up, the labor pool has shrunk, and oil prices have rallied. All of these things have increased the price for food at the grocery store- 6.8% year over year in January for cereal and bakery goods. The conflict in Ukraine has increased commodity prices and raised fuel prices- two key inputs for food. In two weeks- corn prices have increased 17%, wheat prices 50% and sunflower oil nearly 15%. Corn and wheat are relatively straight forward but why include sunflower oil? Sunflower oil is part of the larger vegetable oil complex that includes oils made from canola, palm, and soybeans. Vegetable oil is used for baking and in products like salad dressing, mayonnaise, and margarine.

Globally food is an inelastic good- meaning that as price goes up consumer buying habits don't largely change and shoppers pay the higher price. Increases in food prices hit the poorest communities the hardest because they are already spending a large portion of their disposable income on food. In the US, average consumers spend about 9% of their income on food compared to Nigeria and Kenya that spend over half their income. These African countries rely heavily on feed grain exports from Ukraine and Russia.

So yes, food prices likely will go up, but the increases due to higher raw commodities like wheat, corn, and sunflower oil will be relatively small in the US due to the size of our value-added industry post farm gate. Concern does exist for poor countries that depend on feed grain imports and don't necessarily have the income to absorb higher costs. Scarcity of food in these regions often leads to civil unrest.

US crop producers benefiting from relatively high commodity prices are experiencing higher input costs as well from diesel fuel to fertilizer. The price of diesel fuel is connected to the price for crude oil, which is trading at its highest level since June 2008. On-farm diesel prices rose 10.5% during the month of February.

Fertilizer prices have been the conversation of many early morning coffee chats for months as they surged to historical highs. Strong demand due to increased acreage and higher commodity prices, smaller production due to high natural gas prices, and increased trade barriers all contributed to fertilizer price increases prior to the invasion in Ukraine. Since the invasion, fertilizer prices at ports have continued to increase and will likely keep prices high well into the US planting season. Russia is the second largest producer, behind China, of Ammonia. While the US produces about 88% of its own nitrogen- limitations in supply around the world raise prices in the US as well. US producers do depend on the global community for large amounts of potash and phosphates. Ukraine's neighbor Belarus recently received inernational sanctions for assisting the Russian invasion. Russia and Belarus together account for roughly 36% of the world's potash production and nearly half of the world phosphate production. Prices for US fertilizer found a relatively high plateau early in 2022, but with limited trade out of Russia and Belarus and economic sanctions likely remaining in place for some time after the conflict ends- fertilizer prices are likely to move higher not lower.

Farm Management in an Uncertain World

In my relatively short Extension career, I have probably done more programs on price risk management than any other topic. My four years working with producers have included a US/China trade spat (2018), prevent plant rollercoaster (2019), global pandemic (2020-2021), and now a war in the European Breadbasket (2022). I am a believer in producers having a bend but do not break mentality when it comes to grain markets and to develop, execute, and evaluate a marketing plan. As the conflict in Ukraine continues- grain, fertilizer and oil markets will remain volatile causing producers to make decisions under conditions not seen previously. I want to share a couple things I've learned the last four years about marketing in uncertain times.

  1. Know your options- crop insurance revenue protection is the main tool used by producers to protect against downside risk. There are other tools such as forward sales, hedge to arrive contracts, and option contracts available to crop farmers. Understanding how these tools work to minimize downside price risk needs to be a consideration in every producer's risk management plan.
  2. Manage the downside first, then worry about the upside- too often I run into producers who regret not selling when the price rallied then fell. I ask them why they didn't sell, and the answer is almost always "I thought the price would go higher". Everyone at some pint is guilty of being paralyzed when grain markets are rallying. Forward contracts and short futures positions trade nearly all the upside potential to remove the downside risk. Strategies like call options or protective puts allow for upside gains but do come at a cost. I typically tell producers to make sure the downside is covered including the cost of an option before worrying about the upside potential.
  3. Keep the end in mind- These type of grain rallies might happy once in a generation. What we have learned is that the global community typically learns how to produce more product lowering the price of the raw goods, but the cost structure stays elevated. Using periods of high farm income like this to build working capital and pay down debt will pay off when crop prices eventually fall and put a margin squeeze on producers.
  4. Hindsight is always 20/20- I encourage people to evaluate their decisions and learn from the ones that worked and those that did not, but not to dwell on mistakes. Conditions change all the time, and we are not always going to get the right answer. Take for instance my own father- he decided not to plant wheat this year because he was concerned about higher fertilizer costs and the ability to get the wheat out in time for double crop soybeans this summer. He was more willing to take his risk on the less costly and more consistent yielding soybean crop. I asked him the other day if he regrated not planting wheat and he said, "nope that decision is past". Risk management is about planning and looking forward not wishing for a different result.


The European Breadbasket is under attack raising the prices of feed grains, vegetable oils, fertilizers and diesel fuel around the world as American producers near spring planting. Lack of trade out of the region initially impacted commodity prices, but the longevity and severity of the conflict could impact production in the region for years. The costs of food are likely to increase even more but at a smaller rate for US consumers compared to the most food insecure countries in the world. Producer profit margins have been cut by increases in input costs that likely won't ease for a while. It is never easy to make decisions in an uncertain world, but that is exactly what American producers are being asked to do. My tips- be disciplined, flexible, and alert.

Subscribe to receive similar articles sent directly to your inbox!

Other Articles You Might Enjoy
   About IPM     Contact Us    Subscribe     Unsubcribe

Copyright © 2022 — Curators of the University of Missouri. All rights reserved. DMCA and other copyright information. An equal opportunity/access/affirmative action/pro-disabled and veteran employer.

Printed from: https://ipm.missouri.edu
E-mail: IPM@missouri.edu

REVISED: March 7, 2022