Who can spare 3 million barrels of oil … per day?

That’s the top question for commodities markets as European nations consider a ban on Russian oil imports.

Russia provides about 28% of the European Union’s oil imports, which would need to be sourced elsewhere in the event of an import ban.

That’s a big reason why oil prices shot up over 3% in response on Monday and remain 42% above where it started the year.

It’s also another example of how Russia’s actions over the last month have plunged commodities markets into disarray, with the world’s largest economic bloc rushing to reconfigure its energy supplies. Ted told you about the new opportunities emerging as the global energy trade is turned on its head.

Yet there is another … perhaps even greater … disruptive force at play that is already sending shockwaves well beyond the borders of Europe.

What’s More Important Than Energy?

Russia’s importance to the world’s energy security is of great strategic concern, but the conflict in Ukraine is also an emerging threat to the world’s food supply chain.

Russia and Ukraine account for nearly 30% of global wheat exports, while Ukraine alone contributes 14% of corn exports and 10% of barley.

Due to sanctions or physical blockades of ports, those exports have ground to a halt … sending prices skyrocketing as you can see in the chart below.

(Click here to view larger image.)

But the challenges go well beyond their respective crop share. Take fertilizers, for example. Russia is the world’s largest exporter of crop fertilizers (see chart below) and has reportedly instructed its producers to stop shipments.

(Click here to view larger image.)

That has led to soaring prices, while the supply of other important crop nutrients is under pressure from the region’s conflict as well.

That means crop yields in other growing regions of the world will be under pressure if farmers can’t access fertilizers or if they’re too expensive … making it difficult to offset losses from what’s referred to as Europe’s “breadbasket.”

Exporting a Food Crisis

As fears over food shortages grow, other exporting countries are becoming wary about sending grains abroad that may be needed at home. Several nations, including Argentina and Turkey, are placing export restrictions as a result.

It’s almost a self-fulfilling prophecy at this point that food shortages take hold, much like the scarcity of many items due to hoarding in the early days of the pandemic.

That’s why the attention will shift to companies up and down the food supply chain to do everything possible to fill the void, which is why I spot an opportunity with the VanEck Agribusiness ETF (NYSE: MOO).

From domestic fertilizer producers to sophisticated farm equipment, these companies and their products will be in high demand to stymie the growing food crisis.

Best regards,

Clint Lee
Research Analyst, The Bauman Letter