May 26, 2022
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Analyst: Markets Could Feel Impact of Ukraine War for Years

The commodity markets have seen a lot of upward pressure during the first four months of 2022. Mike Zuzolo, president of Global Commodity Analytics in Kansas, says support is coming from several factors.

“With this week’s move higher in corn, getting to $8.19-3/4, putting us up to the highest levels and now within reach of the August 2012 high of $8.43-3/4. You know you have the hard-red wheat drought, you have the E15 blend increase in the summer, you have the corn planting delays that are starting to increase and put more pressure on a marketplace that is expecting bigger acres than the very-small acres that USDA gave us at the end of March. And then you have the soybeans supported by the vegetable oil market, which is supported by the crude oil market. And that is supported by, obviously, the biggest feature of all, and that is the Ukraine war.”

He said the war in Ukraine could potentially impact the markets for years to come, but that impact is uncertain.

“Well, I think it depends on who wins. I mean, this is where it goes back to how big does the war get? Does NATO get involved because it goes from two countries who are being supported by a lot of countries, or does this expand into a NATO and China and Syria and Iran conflict, where it’s more regional? And therefore, then, it could bloom or blossom into almost a full-scale World War? I think that is something that the trade is starting to consider, and I think they should.”

Zuzolo is concerned about the wheat and energy markets.

“When we saw the weekly stocks of distillate fuels here in the United States come out from the Department of Energy – our distillate, which is mainly heating oil and diesel fuel – our distillate inventories are the lowest since 2008. And so, all of a sudden, we have a situation where the wheat market is contending with a situation very similar to 2008 in terms of drought potential knocking down the yields and the production, and then, all of a sudden, we have the energy sector here in the United States looking a lot more like 2008. If you throw on top of that the Russia Ukraine issue, then yes, you can have something that lasts for quite some time, and it could be years, even, depending on how much this dismantles globalization. I think that’s a real possibility.”

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