Farmers watch border dispute

“If you took out one of the larger wheat exporters such as Ukraine, it would tighten up supplies in an industry that is already struggling with logistics” – David Jochinke, left

Wimmera grain growers are part of a global audience closely following developments as tensions build in Eastern Europe between Ukraine and Russia.

With Ukraine a major global supplier of wheat, a conflict between the countries, apart from being an international disaster, could also influence trade markets and ultimately the price of Wimmera grain.

Murra Warra farmer David Jochinke said wheat prices had already risen by about $30 as a result of anxiety surrounding the potential of the countries going into a military conflict

“There was an increase in price at the start of last week when the Russian forces gathered at the border,” he said.

“If Russia and Ukraine are going to have a dispute there will most likely be an effect on the supply and demand of wheat and its price globally.”

The Russian government had deployed about 100,000 troops on the Ukrainian border late last week.

Mr Jochinke, who travelled through the Ukraine in 1997, said the country had some of the best agricultural soil in the world, which meant it was competitive on the international market.

“When I visited Ukraine, their topsoil was over a metre deep in many places,” he said.

“The organic matter in the soil meant they had fewer input requirements, which kept the costs to grow their crops low.

“If you took out one of the larger wheat exporters such as Ukraine, it would tighten up supplies in an industry that is already struggling with logistics.”

Ukraine is one of the largest exporters of wheat globally, producing 12 percent of the world’s supply this year.

Mr Jochinke said Ukraine had one main export seaport in Odessa and if the dispute continued, transportation from Ukraine would become difficult.

He said there was a high degree of market uncertainty in this type of situation, but one outcome might be that the price of wheat would continue to rise.

Mr Jochinke said Australian broadacre farmers, although exposed to the crippling market effects of drought, had no exposure to circumstances such as the threat of war.

He said they now found themselves confronted with an uneasy situation, where they might benefit from serious conflict overseas.

“While it is an opportunity for us in farming, on a humanitarian scale it is also quite terrifying,” he said.

He said the potential European conflict and how it could inadvertently create short supply in an already high-demand market for the quality of wheat, might give confidence to Australian farmers to grow crops with higher-than-usual input costs.

“There are a lot of factors about this type of environment – volatility gives you opportunity – but you need to have smart management at all levels to manage the risk,” he said.