Perspective: Morning Commentary for February 18

By: Arlan Suderman, Chief Commodities Economist

Fri, 18 Feb 2022, 14:04

Perspective: Morning Commentary

Arlan Suderman

Chief Commodities Economist

February 18 – The ebb and flow of rumors about the prospect of a Russian invasion into Ukraine continue as we close out the week, with many traders leaning toward the belief this morning that diplomacy will prevail, although nerves may increase ahead of the weekend. Keep in mind that the U.S. markets are closed on Monday for President’s Day, which means that traders face an extended period of risk over the next three days when headlines continue to flow, while the markets are closed, potentially putting trader positions at risk. That factor may come into play more ahead of today’s close. The VIX is trading near 28 this morning, reflecting elevated levels of anxiety on Wall Street. The dollar index is trading near 95.8, while yields on 10-year Treasuries are trading near 1.95% as money flows to safe-haven assets. Crude oil prices are nearly 2% lower, while the Ags mixed.

Ukraine accused Russia of shelling another village today, while Russia again insisted that it is withdrawing troops. The crisis remains within the “window of opportunity” for something to happen. Russian President Putin invested a great deal of resources in putting more than 150K troops, tanks, and other military resources around 70% of Ukraine’s border. He can’t come home empty-handed, but that doesn’t mean that he necessarily needs to take Ukraine by force. Significant concessions from the West could be reward enough for Putin, as would be the installation of a puppet regime in Ukraine, although attempts at the latter have thus far failed. U.S. Secretary of State Atony Blinken has agreed to meet with his Russian counterpart late next week on the condition that an invasion has not occurred by that point. That suggests that opportunities for concessions remain in place for Putin.

There’s no doubt that Putin would like to have control of Ukraine, but there is a cost to doing so, and there is a limited amount of time in which for Putin to do so. Crude oil prices are approaching $100 per barrel. Russia is the third largest exporter of crude oil in the world, bringing Putin nearly $1 billion per day in revenue at current prices. That could be at stake if sanctions shut off his ability to export due to an invasion. On the other hand, it’s a lot of money to finance his military endeavors as long as the oil continues to flow. Putin gains a lot of political support at home if he succeeds in getting significant concessions from the West, especially if he can do so without the human cost of war. But the clock is ticking. Tanks are heavy, and they perform best on rich Ukrainian soils when the ground is frozen. Spring is just around the corner. The window of opportunity is now, pivoting around Military Day in Russia on February 23^rd.

This conflict could still very easily go in either direction, which is the risk that the market must respect headed into a three-day holiday weekend here in the United States. Shots are being fired in eastern Ukraine, which could quickly escalate into a much broader conflict. In fact, observers say that the fighting is the most intense since 2015. Ukraine states that Russian-backed rebels have previously infiltrated eastern states of its country, occupying government offices and insisting that they represent the Russian-speaking people living in the region. Russia’s government is taking steps to recognize these states as independent states. This sounds a lot like what happened when Russia occupied Crimea in 2014. Firefights within these states can then be deemed by Russia as a Ukrainian offense against these “independent” states, giving it justification to move in to “defend” these states from aggression by Ukraine. That alone would be seen as a political win for Putin at home, while allowing him to control areas of rich natural resources and further weaken Ukraine as a country, while hopefully getting concessions from the West that it would not allow Ukraine to enter NATO. The chess match continues.

Argentine corn and soybean crop ratings declined modestly again this week, while combines added confirmation of low yields in southern areas of Brazil. Heat and dryness continue to be a factor in Argentina, although significant rains are expected to reach portions of the belt starting Wednesday of next week. It’s clear that South America as a whole will have a short soybean crop this year. It’s not yet clear how short that crop will be, nor is it clear what the impact on its corn production will be yet. Soybean basis remains strong amid a lack of farmer selling, with reports of Chinese buyers washing out previous purchases of Brazilian soybeans due to poor crush margins of the higher cost soybeans, although there have also been reports that some of those washed-out cargoes were switched to U.S. origin. U.S. Gulf soybean bids are cheaper than Brazilian origin today from April forward. That is very rare for this time of year. The flow of fundamental information from the region should ratchet up in March as the supply begins to become clearer – both for soybeans and for corn, although corn is more of a longer-term story.

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Matt ZellerWed, 05 Aug 2026, 12:39

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Mike CastleTue, 04 Aug 2026, 14:58

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