It’s no secret that threats to Black Sea shipping have caused distortions in futures markets, especially wheat. Rumours of possible deals between Russia and Ukraine brokered by Türkiye have pushed futures lower, followed by denials, which cause prices to spike. 

While the focus has been on wheat, numerous other crops are being affected but haven't made the headlines. Any crops for which Russia and Ukraine are large exporters are affected by the blockage in Black Sea vessel movement and constraints in other transportation corridors. Without some sort of truce, at least with respect to shipping, importers are forced to scramble for other supplies.

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For the Canadian market, the crops (other than wheat) most affected by the Black Sea situation are barley, peas, flax and, to a lesser degree, mustard, lentils and chickpeas. The most obvious example recently was the sharp spike in Indian pea prices, now that Russian peas are a lot harder to access. Other responses could start showing up soon.

Volatile markets are always difficult to navigate, especially when driven by geopolitical events. Weather is unpredictable but at least a person can track potential impacts if it rains (or doesn’t) and the possible yield effects. When grain market volatility is caused by money flow tied to war, the fundamental connection is loose (at best), making it unrealistic to try predicting ‘the day’ when markets will peak. 

Some things that help us think through markets like this are keeping focused on the fundamentals and avoiding getting caught up in the noise. For futures-traded crops, basis, futures spreads and good old-fashioned S&Ds keep the focus on the bigger picture, even if they don’t ‘fine tune’ short-term turning points. Non-futures traded crops are less volatile and may be a better reflection of on-the-ground realities.

There’s no magic formula that allows you to ‘see around corners’, in a normal environment or a noisy one. But markets eventually drift to where the fundamentals suggest they should, even if events cause them to deviate for a period of time.

A new calendar year is a good time to start something new. We started 2024 by introducing the Market Strength Scorecard, a data-driven tool that combines several key market indicators to generate a score for each crop. 

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The scorecard doesn’t cover all possible market factors but tracks four measures we think are most useful:

•    Seasonality – A measure of the price patterns that tend to show up in most (but not all) years.
•    Price Momentum – An indicator of how strongly prices are moving (in either direction). 
•    Historical Context – A measure of the current price in relation to its history. 
•    Fundamental Signal – A way to show the strength of the supply & demand situation.

The scores aren't predictive and they're not marketing recommendations. This tool isn't the be-all-and-end-all, but we think the Market Strength Scorecard offers objective data-driven analysis for better decision-making.