Anyone who thinks that you can have political instability in the Ukraine without it affecting the supply of grain that usually comes out of this country is kidding themselves. This supply chain of some of the cheapest wheat and corn in the world is already being impacted as local farmers hold their old season grain as a hedge against deflation of the Ukrainian currency. The supply of inputs into the country will 100% be impacted on and detrimentally detract from the health of the winter crops currently in the ground and the ability to produce spring crops once it arrives. Diesel, fertilizer, herbicide shortages will be the norm.
What does this mean for Australian farmers? Egypt, one of the world's largest wheat importers, has recently relished this newer supply of cheap grain as foreign money began to raise the productivity of Ukrainian farms. Egypt will now have to source the grain from elsewhere and AUstralia could well see some of that.
Bottom line, watch the basis. Everything you have come to know about its behaviour is going to be tested. It will remain strong when traditionally at certain points of the year it will have weakened. The futures markets manipulators will continue to gloss over the supply holes but end users will have to convince the physical trade to part with ownership and that takes better prices than what investors will take for their paper longs.
The supply chain has the potential to crumble under the weight of political instability and decades of underinvestment which ultimately spawns when you articially keep prices low (eg print money to fund paper shorts). Make no mistake grains have suffered the same long tragic history of price manipulation to the downside via similar paper shorts funded means.
