Fears of a Russian invasion of Ukraine continue to grow and the tension has huge implications for global commodities markets, with the two countries being among the world's principal suppliers of wheat and corn, along with fossil fuels. An invasion could lead to trade sanctions on Russia, and would seriously disrupt the supply of these commodities.
Wheat and corn are likely to rise in price in the event of a Russian invasion. In assessing the impact, we consider two factors:
Ukraine's and Russia's portion of global supply;
The precedent of the Russian invasion of Crimea during 20 February-27 March 2014 and its impact on commodity prices.
Wheat
Russia and Ukraine collectively represent one-third of the world’s wheat supply.
Wheat prices rose 13% during Russia's invasion of Crimea.
Corn
The two countries represent one-fifth of the world’s corn supply.
Corn prices rose 8% after the Russian invasion of Crimea.
Potential stock winners
Three of the four potential stock winners that we have chosen – Wilmar (WIL SP, on which we have a Buy rating), Archer-Daniels-Midland (ADM US) and Adecoagro (AGRO US) – are either primary producers of wheat and corn or branded processors. We have added branded chicken producer Charoen Pokphand Foods (CPF TB, also a Buy) because this player can pass on its input prices.
