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Concern recent dealings between China and Russia could threaten U.S. ag export demand

There’s concern recent dealings between Russia and China could eventually cut into U.S. ag export demand.

The two world powers have announced a trade deal on energy products worth more than $117 billion and China also agreed to lift restrictions on Russian wheat imports.

Mike Zuzolo with Global Commodity Analytics says there could be many implications that farmers should account for when managing risk.

“The per-acre revenue in soybeans is at a 14-year high and we’re in the middle of crop insurance month, and there’s a way to manage that risk. And I think you really have to take a hard look at it now that in my opinion, we’ve ratcheted up the tension possibility of not taking just a disagreement that can be solved diplomatically, but moving it on forward unfortunately potentially into an armed conflict.”

He tells Brownfield South American production problems should help soften the blow if Russia and China try to alienate the U.S.

“In other words, the negative demand scenario may not be as severe as what it could’ve been if Brazil and Argentina would not have had any weather problems.”

Zuzolo says wheat has been the leader as commodity prices have climbed to multi-year highs.  Russia is the world’s largest wheat exporter, and he’s concerned a widening divergence between wheat and crude oil could signal the end of the rally.