US Ag Market Tied to Crude Oil Prices as Iran Conflict Escalates

The US agricultural market is being closely tied to crude oil prices, with the Iran conflict causing a significant escalation and pushing Brent crude oil prices past $100 a barrel. As a result, October crude oil was up $10 and closed at $100.70 on September 10, while the December contract was up $8 and closed at $92.37. This price increase has a direct impact on grain prices, which are expected to remain volatile until the conflict resolves.

The Ukraine agricultural sector is also undergoing significant changes, with 110 vertically integrated agro-holdings controlling all or part of the production chain. These entities aim to maximize returns on invested capital by investing heavily in cutting-edge equipment and inputs. For example, Kernel, Ukraine's largest ag holding company, has 3.5 million tons of sunflower seed crushing capacity and employs over 10,000 people.

However, the moratorium on land sales in Ukraine until 2019 severely restricted its agricultural progress and investment in innovation. The restriction hindered the ability to use land as collateral, making it difficult for small farmers to invest in their operations.