It’s not easy to get a handle from an economic perspective on what some of the outcomes and the impacts are of the Russian invasion of Ukraine.
It’s already caused inflationary pressure, as Russia becomes cut off from the rest of the world, but as Kevin McNew, chief economist at Farmers Business Network (FBN), explains, some of the inflationary environment in agriculture is due to demand, while some of it is more supply related.
McNew has published a report on the economic state of agriculture, and he joined RealAg Radio host Shaun Haney at Commodity Classic to discuss some of the highlights.
“Canadian and U.S. farmers had a really tough growing season. So we’ve had really good upside in grain prices. But the last while with the war in Russia and Ukraine has just been a lightning rod for grain markets as we go into the planting season,” he notes, adding farmers should be anticipating even higher prices going forward.”W’ere going to say that farmer prices for ’22 will smash record highs in the coming year, because of all the uncertainty and hte big loss of grain supplies out of Russia and Ukraine this year.”
Both the U.S. and Canadian governments are concerned as inflation continues to rise, with one of the sharpest examples being gas prices. When looking at oil prices, and countries cutting off imports of Russia oil, McNew says he’s very bullish on where oil is headed.
“We were calling for $100 oil well before any of this was even going down. The reason is because we were getting into this world shift, where the world was trying to move to green energy and away from fossil fuels. But it’s not an easy transition. We saw a lot of heartache and a lot of consternation that was going to happen around that,” he says. “So now when you add in the loss of a number two or three supplier of energy to the world, it’s a massive disruption. So I firmly agree that 150 is within striking distance, and 200 is not out of the realm of possibility.”
Another point that’s very important to keep in mind going forward, says McNew, is that the immediate first order effects of Russia being shut off from the market aren’t going to be the only impacts.
“There’s this global ripple brewing that’s going to strike, which is Russia’s sovereign debt is at risk of major default. It’s going to have widespread global risk to all the banking institutions around the world. So I don’t think this story is over — but this will continue to unfold as we go forward.”
Check out more from McNew, below: