Market uncertainty

Federal and state leaders are warning the Wimmera and similar regional areas will be far from immune from socio-economic fall-out caused by the Russian and Ukrainian conflict.

Member for Mallee Anne Webster said the situation in Ukraine would affect Mallee broadacre farmers, but was unsure of the extent of the impact.

“Producers have managed all manner of trading environments for many years and the Federal Government will be watching closely and advocating for the interests of Australia,” she said.

The conflict between Russia and the Ukraine escalated after Russia invaded its neighbour last week.

Agriculture Minister David Littleproud said the Federal Government had imposed sanctions on Russia and was ready to extend them in partnership with the international community.

“The Australian government and all Australians are deeply concerned with the unprovoked and unacceptable aggression by Russia against Ukraine,” he said.

Mr Littleproud said energy prices had risen, but it was hard to predict how long this would last.

“Russia is a major producer and exporter of fertilisers and the largest supplier of many fertilisers Australian farmers would be familiar with, like urea, ammonium and nitrogen,” he said.

“Australia doesn’t import significant quantities of these products from Russia, but they are a major exporter globally, that could mean farmers will face high prices for these inputs.”

Mr Littleproud said the conflict had created input-price uncertainty.

“The impacts of the conflict could be felt both directly and indirectly on prices for commodities, energy and critical input prices including for fertilisers,” he said.

Russia and Ukraine are large-scale economies and crucial geo-political countries with a significant influence on international trade.

Analyst Dennis Voznesenski from agriculture banking specialist Rabobank said the Russian and Ukrainian conflict would have large ramifications for global and Australian wheat and oilseeds markets. “The loss of access to the Black Sea for wheat exports has not occurred in more than 100 years,” he said.

“It accounts for 34 percent of global wheat exports. It will see exports out of the region grind to a halt, at least in the short term, due to blockages to shipping and the high cost or lack of availability of insurance for vessels.”

Mr Voznesenski said sanctions would cause long-term structural changes to wheat exports.

“Global wheat prices have already risen 21 percent since February 1 of this year, and could rise another five to 10 percent,” he said.

“If the conflict continues to July when the Black Sea harvest starts and with sanctions on Russia being implemented, global prices could rise another 61 percent from their current levels.”

Mr Voznesenski said apart from wheat, the conflict would cause disruptions to canola, feed and barley markets.

“Ukraine is the third-largest exporter of canola in the world after Australia and Canada,” he said.

“Russia and Ukraine are the largest producers and exporters of sunflower seeds and sunflower oil.”

Wimmera farmer and former Victorian Farmers Federation president David Jochinke said the geo-political conflict between Russia and Ukraine had created a ‘fear market’ in the grains community.

Mr Jochinke said a fear market was when bad news increased the price of a commodity, and good news lowered prices.

“Currently we have a classic fear and greed market,” he said.

Mr Jochinke said grain prices were in high demand and there was a risk premium for the commodity.

“A risk premium is the ability to deliver what you promised. If you are unable to deliver what you promised it makes a commodity more valuable and creates a premium,” he said.

“Everyone wants to secure grain from a country which has no risk. The farmers here can meet the supply and we will benefit from the situation, but it’s not a nice scenario to be in.”

Mr Jochinke said the Federal Government’s sanctions on Russia were no hindrance to Wimmera broadacre farmers.

“As farmers, we would feel more ripples go through our industry if our Chinese suppliers were affected. Russia in comparison with China wouldn’t be considered a major supplier to Australia,” he said.

Premier Daniel Andrews said the overt act of aggression by Russia would cause harm and untold suffering to thousands of Ukrainians.

“This will be a distressing time for Victorian Ukrainian and Russian communities. We should always look to peaceful resolutions of conflicts, not violence and aggression,” he said.

“Whatever happens today, or in days to come, we stand ready to support these communities.”

State Coalition leader Matthew Guy, of Ukrainian descent, said the invasion was ‘incredibly’ challenging for Ukrainians in the state.

“The Victorian Liberals and Nationals condemn in the strongest terms the use of force and aggression against sovereign nations,” he said.

“We stand with our Ukrainian community and all Victorians who value peace, democracy and the rule of law. The Victorian Liberals and Nationals will work together with the State Government to support affected communities during this deeply challenging time.”