Russia reportedly attacks Ukrainian port on the Danube River, wheat prices soar

Wheat prices soared after Russia reportedly launched a drone attack on a Ukrainian port along the Danube River. It comes after Russia backed out of a deal that allowed Ukraine to ship its wheat via the Black Sea. Teucrium Funds Chief Executive Officer and President Sal Gilbertie tells Yahoo Finance Live that, when it comes to Ukraine and Russia, "we are kind of back where we were last year... we're approaching that same fear level." Gilbertie also discusses the impact of weather on grain prices and how agricultural technological advances may help with supply issues eventually.

Video Transcript

- We did see soft commodity prices jumping last week after Russia pulled out of a crucial deal allowing the export of grain through the Black Sea. Corn and wheat spiked in particular as markets tried to decipher what Moscow's withdrawal means for global supplies. Our next guest says commodity markets are now focused on war and weather with uncertainty over shipping in the Black Sea putting all investors on edge.

Joining us now Sal Gilbertie, Teucrium Funds Chief Executive Officer and President. Sal, it is great to see you once again. So the dynamics-- I guess, first of all, tell us what has changed in the past year or so when it comes to these dynamics? Or is it just sort of more of the same and emphasized in certain areas?

SAL GILBERTIE: Well, good morning, Julie. Good to see you as well. What's changed is that we had after last year's initial price burst because everybody basically priced in a worst case scenario of exports out of the Black Sea stopping, we had the grain deal and we had a pretty good year of a lot of grain moving out of the Black Sea and moving out of the Ukraine.

And now we're kind of back to where we were last year in that we're approaching those old highs. We're approaching that same fear level that the market is trying to price in, in essence, a loss of all exports from Ukraine. That's what the market's pricing in right now. And that's an adjustment. So Russia's turned up the heat. That's a bigger deal than people might think. I think people in the markets have grown complacent over the past six or eight months. And we're kind of back to where we were a year ago where we have heightened fears of supply disruptions and commodity inflation.

- So I think about the weather right now as well as one of the impacts on commodities too. I mean, we've seen some of the hottest days that Earth has ever seen in this year and early in the summer as well. So how has that impacted some of the commodities landscape mostly in looking through your notes here as well, mostly as we're kind of correlating this to crop production.

SAL GILBERTIE: Sure. Well, it matters how hot it is where they grow crops. So the world can be hot in some places, cool in other places. All that matters to a farmer is what the weather is over his field, his or her field. And so what we've seen is China actually has seen a lot of heat this year. They had too much rain a couple of years ago, which literally started the grain rally. This year they've got a lot of heat coming in and there are worries about China's grain crops, particularly their rice and their wheat.

India has enormous issues and it fluctuates between too much heat and too much rain. But they have huge issues and they've actually banned about half their rice exports, and they are the world's largest rice exporter. So we had very big drought in Argentina, which affected wheat exports and soybean exports this year. And right now, the US has started off with a really dry spring. The corn conditions are unknown. We hope that they improve because it has started raining the past couple of weeks here.

Wheat is pretty sad condition in the United States, but there's plenty of wheat elsewhere, especially in Russia. So weather is a huge factor here. As the Earth warms, interestingly enough, it's good for crops because warm air holds more moisture and you get more rain, but it's all locational. It depends where it's hot and where it's dry.

- And Sal, the agricultural industry has also made enormous technological strides to try to deal with some of this change in climate. Is that going to result in some point in a more even smoothing out of supply and smoothing out of prices? Or are we a long, long way away from that?

SAL GILBERTIE: I think we're a long way away from that. There have been some good genetically modified engineering improvements, especially for corn growing in heat and corn growing and all crops growing in dryness. And so a lot of companies work on that. It's really important. And they do-- they are making progress. But that takes a long while. And you have real-life events like a war in the Black Sea that can disrupt even the greatest technological advances in growing.

- Wow. OK. And so one of the other things that you mentioned in your note that I really kind of latched on to here was also how Brazil is now the most important country for corn, soybean, global export markets as well. Can you just break that down a little bit further for us?

SAL GILBERTIE: Sure. Brazil has a lot of space, and they are filling it quickly with crop land. And they have overtaken the United States now in both markets. A couple of years ago, they overtook us as the leader in soybean exports. The United States was always number one. Now it's Brazil. And Brazil grows and exports more soybeans than the United States right now. Now they've taken over as corn. So Brazil has a longer growing season than we do. They can plant soybeans and then plant corn after that in the same season. So they have an advantage geographically, and they have become the dominant force.

And let's not diminish the United States' power in the soybean and corn markets, but Brazil is basically filling the gap. The United States has a drought some kind of effect that we'll see what-- we'll end up seeing what the conditions of our crops are in a couple of more weeks and months here. But Brazil can fill the void. Brazil can fill the void for soybeans and corn. Russia can fill the void for wheat so long as exports remain-- the export corridor in the Black Sea remains open to Russia as well.

- Sal Gilbertie who is the Teucrium Funds Chief Executive Officer and President. Great to always get some of your insights and perspective. Really appreciate it.

SAL GILBERTIE: My pleasure.