Ukraine is the world’s third largest exporter of corn and fifth largest exporter of wheat, which has caused some havoc in those markets lately.
While political unrest continues to grow in and around the country, global grain prices have charged upwards. “The importance of the Black Sea region to global grain markets should not be understated,” Luke Mathews, an analyst at Commonwealth Bank of Australia, said in a note this morning (paywall).
Global corn prices have risen by over 8% since the beginning of the year.
And wheat prices have jumped by about 11% since just a month ago.
The problem isn’t this year’s harvest—the country is sitting on some 4 million tons (3.63 million tonnes) of corn and 2.5 million tons of wheat, according to estimates by Agritel SA. The problem is that local farmers are sitting on their stockpiles instead of selling them off, because they’re worried about the possibility of an imminent and potentially debilitating currency depreciation.
“Many producers are now said to be withholding stocks to safeguard themselves in case the Ukrainian currency should collapse,” analysts at Commerzbank told the Wall Street Journal. Farmers are holding onto their grains as a hedge, because corn and wheat aren’t as sensitive to the country’s monetary woes. If that tactic continues, it will continue to drive corn and wheat prices up, which could pinch big grain importers like China.