Russian invasion of Ukraine could drive global food prices up
The last thing the shaky global recovery -- and the mining industry in particular, we would add -- needs now is a further spike in food prices caused by disruption to farming in eastern Ukraine.
Ukraine is the world's third-largest exporter of corn, the sixth-largest of wheat, and almost all of that is grown in the Crimea and other eastern parts now trembling under Moscow's boot (voting in Crimea was due to begin late yesterday).
Any denting of the fragile global recovery sentiment would (probably) have severe consequences for metals demand, a blow this sector can barely afford, with copper down 13 per cent so far this year and fears of a huge unloading of physical metal as financing deals are unwound (as explored here last week).
Copenhagen-based Danske Bank says of potential disruption of Ukrainian food exports that this is the last thing the "shaky global economy" needs. It adds that both Russia's and Ukraine's economies are struggling and they need every cent of revenue they can lay their hands on.
Ukraine supplies about 40 per cent of all the wheat grown in Europe, 20 per cent of the corn and 10 per cent of the rapeseed.
While the wheat and corn are grown mainly in the threatened eastern part of the country, the rapeseed is produced mainly in the west, so is not (yet) threatened by Russian acquisitiveness.
Up to 60 per cent of Ukraine's output of wheat and corn is exported while 95 per cent of rapeseed is shipped abroad. Disruption, especially of grain exports, would have "severe repercussions" for the global grain market, the bank says.
Here's another cruncher: there are just a few months before the wheat harvest is due. Unavailability of Ukrainian grain is not what Europeans would like to see.
This past week we have seen what the Commonwealth Bank termed "massive speculative investor and fund" buying of wheat positions, all pushing the prices higher.
Food prices do, indeed, pose a threat to the global economy -- and global stability (remember the food riots in Tunisia and Egypt that brought down those governments). As of last week, coffee prices have risen 78 per cent since January 1, sugar by 23 per cent and soybeans by 11 per cent. Now wheat prices are on the march.
Black Blade: Another good reason Vlad wants to take Crimea is that it and the Russian dominated eastern Ukraine are the "Breadbasket" of the old Soviet Union. Today's Ukrainians are considered to be modern day Kulaks. Add to this the potential oil and gas reserves in Crimea and offshore then you see why Vlad Putin wants the annex Crimea so badly. Taking food and energy from Ukraine and Vlad puts a world of hurt on the Ukrainian people.