Spring Planting Season Comes with Challenges
Farmers across the Northern Hemisphere are gearing up for the spring planting season caught in the crosshairs of the La Niña weather phenomenon, higher farming costs from the surge in oil and fertilizer prices adding to already elevated inflation, and the unfolding crisis in Ukraine. In addition, borrowing costs are likely about go up in the United States for the first time since the 2015-2018 cycle, with the Federal Reserve (Fed) expected to begin raising short-term interest rates in mid-March.
The turmoil over Ukraine has already lifted prices for primary commodities such as corn, soybeans, and wheat to multi-year highs (Figure 1), which could in turn up the heat on rising consumer prices for meats and other foodstuff and put pressure on margins for food companies. Corn and soybeans are the primary feedstock for livestock and poultry. Wheat is a critical ingredient in diets all over the world, from breads, scones, cakes, pizza, noodles, and so much more. With food prices soaring, the economic implications are most severe for emerging market countries where spending on food makes up a higher percentage of total income, but the economic ramifications will also be felt in developed countries.
Figure 1: Soybeans, Corn, and Wheat
Ukraine-Russia Wheat and Corn
Let’s start with an examination of the spring planting season in the region with the highest level of uncertainty.
Farmers in southern and eastern-southern Ukraine are typically the first to kick off the spring planting of corn in mid-April and sowing in the primary growing central-west and northeast regions begins in May, according to data from Foreign Agricultural Service of the U.S. Department of Agriculture (Figure 2). In Russia, sowing of corn traditionally begins in the north, south and central districts in mid-April.
Figure 2: Ukraine planting regions.
