Market volatility, thy name is war

Ag trade photo

Grain traders live for times like these. We call them “black swan” events. “Black swans” are events so unlikely that we cannot predict them or allow for them. They have huge consequences.

By definition, the war in Ukraine is maybe not a black swan, since the administration had been predicting it for several weeks. I am surprised that, universally, observers say that they never thought the invasion would happen.

Well, the effects, for those of us watching grain markets, were violent and volatile, and we will be talking about them for a long time. Mostly, we will be talking about how we were waiting to react, and the opportunities went away.

The last true black swan may have been the Chernobyl nuclear disaster, which also happened in Ukraine. What is it about that part of the world?

I remember the third or fourth day of that event, when farmers were squeezed into my small office, putting in grain sales targets above the market, hoping to hit a home run and worrying that they were selling too soon. They were too late, in fact. The market crashed before any of the targets were hit.

Roller coaster

It was much the same last week as a friend called out to me for my opinion, and I said to sell before it was too late. Then I told him I was in the middle of leaving the parking lot and I would call him back.

The market collapsed Feb. 25, and I haven’t called yet. Sorry, Dave!

Looking at the numbers gives us vertigo, and then we barf. This was worse than the worst roller coaster.

New crop beans had a high of $15.55 Feb. 24 as the invasion started, then plummeted to $14.03 Feb. 25 as rumors of cease fire talks started. That is a range of $1.52!

New crop corn futures made a high of $6.461⁄4 Feb. 24, and then crashed to a low Feb. 25 of $6.233⁄4. March futures made the second highest price in history, at $17.19. Briefly. The net results were disappointing, to say the least.

Old crop beans lost a dime, the new lost 50 cents! Old corn lost 54 cents, and the new lost 12. Say it ain’t so!

This is a classic demonstration of buying the rumor and selling the fact. The selling is always worse. Except, in this case, the volatility is not over.

The talks in Belarus between the Russians and the Ukrainians were characterized by Russian posturing and fell apart. The rally returned Feb. 28, and, so far, on March 1, as this was being written.

Feb. 28 the new crop corn gained 171⁄2 cents. So far March 1, we were up 321⁄2 cents, at $7.30. The new crop is trading $6.273⁄4, plus 201⁄2. Similarly, the old crop soybeans are at $17.061⁄4 the morning of March 1, plus 62 cents. Feb. 28, we were up 54 cents.

The new crop has not been as exciting, with Feb. 28 being down 203⁄4, but March 1 so far, we were up 41⁄2 at $14.791⁄4.


Almost lost in the volatility of the soybeans is the wheat crop. Ukraine grows winter wheat much like our SRW. Wheat is the crop most directly affected by the upheaval there.

Chicago wheat futures gained 50 cents last week, and continued the gains this week. March futures actually lost 83 cents Feb. 24 after a $9.511⁄4 high, but Feb. 28 we got back 85 cents.

On March 1, we were up an additional 471⁄4 cents, at $9.751⁄4. If you are wondering, we are still nowhere near the all-time high. That was $13.34, back in 2008.

There are a lot of numbers this morning. All of them presented are to say volatility is the theme of unknown events.

War continues

Right now the war continues, and we are back on the rise. The rise will end when the market realizes that the fear we are building into the prices is unjustified.

Ukraine agricultural production represents about a tenth of what the U.S. produces. It has long been referred to as the breadbasket of Europe, but the fact that we are so much bigger in production is a measure of how blessed we are.

It remains to be seen how much production and exports there will be disrupted by the war. It is in Russia’s best interests to protect the crops.

However, if you are a farmer there, it is hard to stay at home, invest money, and work like nothing is happening.

It remains to be seen what prices the situation will eventually justify. What is undeniable is that these are sales opportunities, and most of us will miss them as we hope for more.


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