Teucrium Trading President & CEO Sal Gilbertie joins Yahoo Finance Live to discuss the threat to wheat, corn, and sunflower supplies as the Russia-Ukraine war continues.

Video Transcript

BRIAN SOZZI: Wheat prices are at their highest level since March 2008. Corn prices are on the march higher. And it all, in fact, makes sense. Russia and Ukraine account for about 29% of global wheat exports, 19% of corn exports, and 80% of exports of sunflower oil. Sal Gilbertie is a grains expert and president and CEO of Teucrium Trading and joins us now.

Sal, good to see you here this morning. So many commodities prices are moving here. Let's lock in on wheat because I've been talking about potentially higher prices for my loaf of wheat bread very, very soon here. What is driving this advance, and do you see any short-term top forming?

SAL GILBERTIE: Hard to say on the second question, but the first question was driving the advance is, this is the second year in a row-- before the war even started, this would be the second year in a row we've used more wheat in the world than we've produced. And the war is, obviously, as you just stated the figures, taking a lot of the wheat supply off the market.

Now remember, this is wheat that's already been harvested. It's winter over there. It's the Northern Hemisphere, just like we're in. And nothing is growing right now. But the wheat, last year's was harvested, and it's in storage. Most of it was shipped, but some of it is not. But the wheat balance sheet globally is tightening, which means people get really nervous. You have to eat, no matter what the price is. And no matter what the supplies are, people are going to scramble for them.

One thing of note is that the wheat in Russia and Ukraine is mostly winter wheat. That means it's planted in the autumn, goes to sleep all winter, sleeping quietly in the fields right now. It will wake up in the spring, and it will grow. It will be there. The question is, will it be harvested? And will it be able to be exported? And I think what we've priced into the market right now is probably that we've lost the near term exports of that wheat that is harvested and sitting in storage.

What the market's trying to do is price in the potential of there not being a planting season or-- sorry, a harvest season for wheat and not being able to get that wheat out of the fields and/or shipped out of the Ukraine. More importantly for corn and sunflowers and sunflower products, which Ukraine dominates the world in, is, they have to be planted. They're not already planted-- they won't grow if they're not planted. Wheat is going to grow. The question is, will it be harvested?

The corn and sunflowers are not planted. There are fuel shortages. There are fertilizer shortages. The supply chain is broken. We're seeing a lot of Ukrainian farmers on social media saying. So you have the corn and sunflower crops in great jeopardy just to be planted, and that could affect the global balance sheet of those crops as well pretty significantly.

JULIE HYMAN: I want to just pick up on wheat again for a second here, Sal, because you said last year, we consume more than was produced or the demand was more than was produced already, before this even happened. Can you talk to us a little bit more what is that a factor of? Is it that-- is it a factor of population growth and demand for wheat? Is it a factor of weather effects and just not enough wheat being harvested? What was happening? And is that something that is going to continue, setting the war aside?

SAL GILBERTIE: Well, so you're talking about both demand and supply. Yes, it is population growth. That's the demand side, and that's not going to stop. And you see the combined use of wheat, corn, and soybeans every year globally rises. It either-- it is the highest amount or the second highest amount ever. But mostly, agricultural supply disruptions are from weather, and you're exactly correct. So we have to go all the way back two years. China had massive weather problems. And last year, because of that, they had to import more wheat than they've ever imported before.

China just started importing wheat a few years ago in the last decade or two. They're not big wheat importers. They imported a large amount-- I think 10 million metric tons of wheat last year. And that literally took the top off the global balance sheet of what they say. So the supply got crimped a little. Understand we won't run out of wheat, but the world is used to-- let's just go by the US. The United States normally has about six months wheat supply on hand.

And now I think we have about four months wheat supply on hand. I'll have to look up the numbers. It's not exactly, but what happens is you get used to a certain level of supply that's just sitting there extra. And if that pile shrinks a little bit, these are eggs. You can't just flip a switch. It takes a whole year, a whole growing season, to plant, grow, and harvest to get them. And so people get really nervous. That's what's happened.

BRIAN SOZZI: Sal, when will consumers and shoppers begin to see these price increases?

SAL GILBERTIE: Well, immediately because of the energy increases and the agricultural increases will trickle in, you know, your box of corn flakes still is mostly the price of energy and packaging than the corn itself. Your breakfast bagel, wheat flour is going to go up.

But I think more because of immediate logistical shortages, people are going to be remembering last year, when we actually ran out of wheat on the grocery store shelves. There was plenty of wheat in the world. It just had to be ground into flour and distributed. That's what'll happen now. There's still enough wheat in the world, but there's not as much as we're accustomed to having. And the growing season in the Northern Hemisphere is just starting. And that's why we see these price moves.

And I would note that we may have priced in the disruption of the loss of the current wheat that's in storage, but we have not yet priced in and won't be able to until we get well into spring and even early summer, pricing the effects on the current crop that isn't even planted yet. That's going to take a while.

JULIE HYMAN: So to be clear, are we going to see shortages? It sounds like maybe not in the short-term, but it is potential in the longer term? Do I have that right?

SAL GILBERTIE: I don't think you will see shortages, global shortages. You may see logistical spot shortages that will be short-lived just because of logistics. But you won't see a global food shortage. Unfortunately, what you're going to see is globally, many, many millions of people, even billions might not be able to afford to buy the food. But the food will be available.

JULIE HYMAN: Well, and let's pick up on that point for a moment because that's an important one, right? Even here in the United States, even if prices go up, hopefully, most people will be able to afford it. But in many countries that depend on many of these grains as staples of their diet, what effect could this potentially have? And does the pricing dynamic work differently in different places?

SAL GILBERTIE: Well, I think the social effect works differently. The pricing dynamic works the same, assuming you have free markets, but the social effect, if you're spending 50% of your income on your food or your basic necessities versus, say, 5% or 10%, that's a big difference. And remember, bread riots are what started the Arab Spring. Bread riots are what started the French Revolution. We've said that. It goes all the way back. This is-- it's a biblical event when you run low on wheat stocks. It truly is.

And it's not just wheat. Sunflower oil, Ukraine dominates the sun seed market, what they call the sun seed market. Sunflower oil is a major cooking oil and component of oils and food. You see palm oil rising. You see soybean oil rising.

This is a very big deal, especially for the poorest of the poor around the world, where cooking was a big part of their daily budget. We're going to see this effect. It's a ripple effect. And even sugar is affected because sugar is related to fuel because of the production of ethanol. And with prices of energy going up, you see, of course, ethanol prices rising as well. And that affects corn, and that affects sugar.

BRIAN SOZZI: Also, I'll say this. It looks like you're well positioned there. You have your wheat in your background. You have your corn in your background. You're well prepared to capitalize on these price spikes.

SAL GILBERTIE: We are here to help the investors participate however they see fit. That's true.

BRIAN SOZZI: That's great. Sal Gilbertie, grains expert and president and CEO of Teucrium Trading, good to see you here. And thanks for being a good sport. We'll talk to you soon.