Lock, Stock & Over the Barrel

Lock stock and barrel – read on. Lock downs, Stock up (food) and barrels of oil -that’s what’s really happening.

Ukraine, Russia (aka Magog), Europe, Israel and the USA will all feel the pain as the proverbial barrel rolls over us. The oil producing nations will be getting some pretty good prices for a barrel in the foreseeable future.

Another economic result of the Russian invasion of Ukraine is our wheat prices rising in the USA. Wheat has doubled already as both the Ukraine and Russia exported wheat. This situation contributed to a massive spike in wheat prices. Russian and Ukrainian wheat are out of the market now. When you combine that with dry conditions here, then you get a roller coast ride in pricing.

Wheat was traditionally $5 per bushel. It’s over $11 per bushel now with peaks that almost hit $12 per bushel as of this writing. Click here to learn about the 6 different classes of wheat in the USA.

Here in the USA, most of the old wheat is already sold, so farmers can’t capitalize on the new high prices now. Buyers are leaving the new crop market, because they were getting crushed by high margin calls or just out of fear of the market. You can’t sell new wheat crop because local markets don’t have a bid on that yet !

Unfortunately, the conditions in the US for wheat crops in Kansas are not looking good either. In fact, some of the wheat hasn’t even come up yet! Presently, in Southern Kansas, 75% has poor to very poor moisture conditions.

All of these items contribute to a long term problem, as the wheat production overseas will take years to get back to normal – especially in the Ukraine. Can you imagine trying to rebuild the Ukrainian agricultural sector along with all the infrastructure required following such a destruction? It will take years and tears. This reminds me of the sowers and of The Parable of the Wheat and the Tares.

Let’s see globally what is happening to:

  • Shipping & Fuel Rates
  • Port Congestion
  • Delays in Shipping

Shanghai China just announced that it’s locking down the city due to new daily record breaking COVID-19 asymptomatic infections.  It’s actually the worst outbreak in two years. This actually caused the price of oil to drop on Sunday !  Omicron again. Chinese officials say that this uptick in the Omicron variant will only exacerbate the global chaos in the supply chain sector.

Brent Crude and US Crude dropped a little bit over $3 dollars a barrel due to these restrictions.

But how does that affect us at the pumps here in the states?  It probably won’t do much.  We only see the price of gas at the pump going up. Presently, a barrel of oil is still well over $110 for US crude, it’s over $116 for Brent crude.

However, the problem is the rebound.  When this two part lock-down ends there’s going  be another log jam trying to catch up.  Shutdowns in Shanghai start during this week into early April.

This will add to the already congested container situation at the Ports. Major ports in China like Shenzhen well also see significant volume shifting to other locations.  All of this causes more congestion for US bound ships.  It will have ships waiting about 2 weeks longer. Manufacturing operations that close down will affect iPhones and Apple products among numerous others.

Expect delays, plan ahead and fasten your seat belts! We’re in for a ride in a barrel over the Niagara Falls.

Contact Us to see how we can save you some headaches. Don’t get taken over the barrel!

By David Lorusso

CEO /DGL Logistics, LLC

[email protected]

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