Friday, 14 January 2011

Various sources (here for example) are suggesting cash strapped farmers in Ukraine and Russia will be cutting back on spring plantings and inputs this year.

Well duh! That's what happens when you impose an export ban and restrict access to lucrative world market prices which are lucrative specifically because stocks are is in short supply because it has been such a crap harvest.
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The upshot being not only did Ukraine and Russian farmers have low yields they have a double whammy of low prices as well because their respective governments decided to ban exports as (I'm being charitable here) a populist political move to keep food prices down when it would have been cheaper to use the existing mechanisms available to them to ensure that vulnerable members of society had access to affordable food by giving them state benefits.
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Now plantings will be down as farmers struggle to find cash for diesel and yields will be down on what is planted as farmers can not afford the increasingly expensive fertiliser.
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Speaking about Ukraine in particular; this is the second year in three when a trade embargo has been enforced.
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Imagine your a grain buyer tasked with hitting your quotas - would you buy from Ukraine, the unreliable grain producer who might default on the deal at any time?