The unthinkable has happened overnight as Russia has launched a full-scale military attack on Ukraine.
Starting late last evening, around 4:00 a.m. local time, Ukrainian border agents were attacked by ground troops, while strategic bombing of Ukraine's military sites and ammunition stores took place. Soon after the initial round of bombings Russia's defense ministry announced it had taken out military infrastructure at Ukrainian air bases, neutralizing its air defenses.
Corn and wheat traded limit higher before midnight Eastern on the news, remaining locked there into this morning as a second round of explosions are being reported. Beans continue to surge higher as well as continued concerns over what this means for global vegetable oil trade has soy oil trading limit higher. Ukraine and Russia are the world's leading exporters of sunflower oil and with global vegetable oil supplies already historically tight, a removal of their supplies from the marketplace is as concerning as losing their corn and wheat.
Currently it appears Russia has shut down sea traffic in the Sea of Azov, impacting a handful of their ports. Two Ukrainian ports are also impacted by this move, though traffic out of Ukraine via the Sea of Azov has been basically halved since the first round of fighting began in 2014.
World leaders are scrambling to figure out just what to do, as it is evident the first round of sanctions did nothing to discourage aggression. As we discussed yesterday, the West is in a very precarious position as we have never had the world's 11th largest economy responsible for a large amount of global commodity supply act in such a fashion.
It is estimated Europe and other NATO members spend 700 million dollars a day just in energy purchases from Russia, shutting off that level of supply would create massive spikes in consumer costs. With consumers already facing the biggest spike in costs year over year in 40 years, it's hard to imagine many will be able to withstand much more.
In addition to uncertainty over just what sanctions would hit hard enough to stop Putin in his tracks, we are now uncertain as to how the central banks around the world will handle this development. Stock indices just about everywhere are down hard this morning as we see a flight to safety take place with crude, gold and other commodities rallying.
Some analysts are now questioning if a major adjustment to interest rates and asset purchasing can take place at this point, as an already skittish market is likely to be pummeled by uncertainty over interest rates. What looked to be a deadlock 50-point rate increase in March is now looking less likely by the day.
Looking ahead, we will get an updated new crop production outlook from the USDA early this morning, though it is likely to get nothing more than a glance from most traders, as new crop balance sheets are worth about as much as the paper they are written on at this point.
Today will be incredibly volatile and loaded with news, much of which will change by the minute. At this point there is little to do but watch and pray for the citizens of each country and the members of the military in other countries likely to be impacted. There will be little today that will provide clarity as we are in an unprecedented situation.
Corn: Limit up at 35 cents
Beans: 44 cents higher