'We’ve got a real shortage' of wheat, corn supplies amid Russia-Ukraine war, farmer says

Hurst Greenery Farmer Blake Hurst sits down with Yahoo Finance Live to talk about the Russia-Ukraine war's impact on agricultural commodities, fertilizers, and pesticides, and supply shortages and price spikes amid the volatile market for consumers.

Video transcript

KARINA MITCHELL: Welcome back to Yahoo Finance. Well, the price of oil continues to spike, hitting $110 overnight amid the Ukraine conflict, now hitting $109 for WTI and Brent hitting $111. That as Putin, Russia, and its oligarchs continue to be sanctioned. And Russian oligarch Abramovich says now that he will sell his Chelsea soccer club amid the Ukraine conflict.

Soft commodities also soaring today, including the price of wheat and corn-- something Russia and Ukraine are large exporters of. What does it all mean for the availability here at home? To help us discuss, let's bring in Blake Hurst, farmer and greenhouse operator at Hurst Greenery. Sir, thanks so much for joining us.

So a quarter of the world's wheat-- more, 29%-- comes from Russia and Ukraine. We've seen massive moves on both in recent days. How worrisome are these rising prices for you? They couldn't come at a worse time.

BLAKE HURST: Well, we, obviously, are in the business of selling corn and soybeans. So the prices have been moving in our direction. But the wheat prices, the corn price-- Ukraine is a major exporter, there's a lot of concern about how long the ports will be closed.

They're closed now. They're unable to export. When that's combined with a drought in South America, which has cut their soybean yields a tremendous amount-- it's not clear how much yet, but we know it's a lot-- we've got a real shortage. And that's not good for anyone.

Even farmers who are enjoying the high prices know that there'll be demand destruction, there'll be cattle and pigs that won't be fed because the price of feed is just too high. So it's not good news for any of us-- a little more stability would be a good thing.

KARINA MITCHELL: What is the immediate impact for you? What are you facing as far as supply and fulfilling orders?

BLAKE HURST: Well, we, obviously, have inventory. What I'm facing is I'm short both corn and soybeans in my normal hedging program. So what I'm facing is a lot of margin calls. But prices are at a profitable level, as far as we can tell.

But we've seen huge increases in our input costs, whether that be fertilizer because of tariffs on foreign imports from Russia and other places, that's fuel costs have doubled or nearly doubled-- fertilizer prices in some cases have more than doubled. We're seeing commensurate increases in the price of transportation, price of seed, the price of herbicides and pesticides.

So it's a great deal of uncertainty. It's very hard for us to plan. We don't know what the prices will be and they're changing, of course, a great deal every day.

KARINA MITCHELL: Well, that was my next question, because how do you plan in this sort of environment? Does it make sense to lock in contracts for the fall and beyond even when you just have no idea what's going to happen because of all of the volatility and the uncertainty surrounding this conflict?

BLAKE HURST: Yeah. As far as the things we grow, the corn and soybeans that we grow, we are doing some pricing. But it's very difficult to know because as soon as you-- we did some pricing the week before the invasion, and then saw limit high moves-- in other words, we were too quick in pricing our products.

So very, very hard to plan. But you know, we'll do the best you can. And all we can do is just farmers without any kind of inside knowledge or anything like that is to reward the market when it moves up and hope that we get some stability here so we can make longer term plans. More difficult is the fact-- just the supply chain difficulties.

Yesterday, we had a supplier for our greenhouse business tell us that they weren't going to be able to supply the things that we'd been planning on for this year. We'd already-- it's pots that we'll fill with plants and sell. We'd already contracted to sell all the goods that would be in these pots. Now we have to call our customers and say, hey, we aren't going to get what we expected.

So we've got excess greenhouse space. We've got excess plants with no home because our supplier failed to meet their commitments.

KARINA MITCHELL: And, sir, the US is a big exporter of wheat as well. And I'm wondering if they need-- excuse me, if they need to export more, what does that all mean for consumption here and, you know, prices for the consumer-- for corn, for wheat, for soybean products?

BLAKE HURST: Well, final consumer prices for the food you buy at the store-- as it turns out corn, soybeans, wheat-- are a fairly small percentage of the cost you'll see at the store. But that percentage is increasing a great deal. So you're going to see continued price increases at the grocery store.

Obviously, as feed costs go up, there'll be less cattle, chickens, and pigs fed because they're no longer profitable. So you're going to see meat price increases. So it's all a part of the overall inflation picture that we're seeing.

KARINA MITCHELL: And all that as cereal prices and wheat prices and products continue to rise, up more than 7%-- almost 7% year-over-year. All right, thank you so much for your time, Blake Hurst, farmer and greenhouse operator at Hurst Greenery.