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 In fact, two of the top three exporters of corn, the U.S. being
No. 1 and third-ranking Ukraine, saw excellent yields at the end
of the season. The No. 2 exporter, Brazil, saw yields fall by
13.58 percent, and another major player, Argentina, saw a
decrease of 9.43 percent.
In seventh place worldwide in corn
production is Russia. And again, this past year saw that country
reporting high yields.
The question now is, if Russia succeeds in bringing Ukraine
back into its fold, how the combined yields would affect its
world standing in crop production. With Ukraine currently third
and Russia making advances in agriculture, Brazil may be
outranked in corn production within the next few years. The
United States could even be in jeopardy of losing its No. 1
status in the longer term.
Would that affect corn prices? Probably. But the direction
they take is still going to depend on what happens between
Russia and Ukraine over the next few months.
Vladimir Putin has been accused of wanting to see his "Mother
Russia" return to the expansive territory it once was when known
as the Soviet Union. In recent days, Crimea has made the key
decision to join with Russia in its stand against a new
Ukrainian government.
This could be key to Ukraine's ability to export because
Crimea is a peninsula on the Black Sea. Crimea lies
strategically between Ukraine and its access to the rest of the
world via sea vessels. Other recent events have included
Ukrainian military units in Crimea and leaders surrendering to
Russia. Combine the two components and it is well within reason
to believe military control of Crimea will be completely in the
hands of the Russian government. If so, even if Ukraine
maintains its independence under the new government, Russia
could effectively block seagoing exports from that country.
If the No. 3 exporter in the world is knocked out of the race
even for a short time, this could drive up the price of corn in
the U.S. as Ukrainian customers scurry to find other sources for
commodities.
This unrest between Russia and Ukraine could also have a more
direct effect on the coming season. If Ukrainians are bound up
in war against Russia, they may not be concentrating on growing
crops. As men go to war instead of to the fields, Ukraine could
slip down the list in exporters and become less important to the
world market.
Ultimately, this could drive the price of corn up for the
rest of the world, though with production being high and
stockpiles growing in the U.S. and other countries, the idea
that supply will not meet demand is not all that likely. In the
end, the battle of wills between Russia and Ukraine may spur
temporary increases in the markets, but the vast stockpiles of
corn worldwide will still keep us from seeing the highs of a
year ago.
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On the other hand, if Putin is successful and brings Ukraine back
into the fold, the primary result could be that instead of Ukraine
being No. 3 in the world, Russia could assume that title and still
even surpass the No. 2, Brazil. The effect that would have on prices
is still sketchy and depends much on how the European Union threats
of sanctions against Russia are received by Putin.
It took 18 years for Russia to be joined into the folds of the
World Trade Organization. Prior to joining the WTO in 2012, Russia
was sanctioned. One such sanction was the Jackson-Vanik amendment,
signed by the United States in 1974. The amendment was meant to
"hinder trade with countries originally labeled as the communist
bloc that restricted freedom of emigration and other human rights."
Russia responded to this amendment by implementing large tariffs on
imported goods, effectively stopping trade between itself and the
United States from both directions.
The bottom line then was simply, "If you don't want to play with
us, we don't want to play with you," and both countries went about
their business without the other.
In 1992, the United States began forgoing the Jackson-Vanik
amendment with Russia, making it easier for Russia to export to the
U.S. However, Russia refused to ease the tariffs on U.S. imports. By
doing this, the Russian government effectively made the statement,
"You need our goods more than we need yours."
Now, only two years into its membership in the WTO, is it not
likely that Putin will decide that Russia once again doesn't need
the rest of the world?
[By NILA SMITH]
Sources:
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