Posted on 03/01/2022 6:13:03 AM PST by blam
Ukraine has earned the nickname "breadbasket of Europe" for its rich dark soil, vast wheat fields, and other farm goods. The Russian invasion has cut off the world from cheap and abundant wheat supplies.
Ukraine and Russia are vital to the global food supply, accounting for more than a quarter of global wheat trade, about a fifth of corn, and 12% of all calories traded globally, according to Bloomberg.
Reuters reports Ukrainian ports will remain closed until the Russian invasion ends and maritime security is restored for commercial ships.
This means all shipments of farm goods from Ukraine have ceased, and commodity traders will have to search elsewhere.
Activity at Ukrainian ports has been halted since Russia invaded its neighbor last week, and grains trade from Russia is also effectively on pause. Sanctions have been ratcheted up to further isolate commodity-rich Russia from global finance by sanctioning its central bank and cutting off various leaders from the critical SWIFT financial messaging system.
Restricting grain supplies from the Black Sea region threatens to further boost global food prices that are near a record high, at a time when supplies are already strained with adverse weather in many growing regions. - Bloomberg
"If the conflict is prolonged -- three months, four months from now -- I feel the consequences could be really serious," Andree Defois, president of consultant Strategie Grains, told Bloomberg. "Wheat will need to be rationed."
Michael Magdovitz, a senior analyst at Rabobank, said Ukraine and Russia had increased harvests and exports in the last decade at a far lower cost than western farmers, which helped keep wheat prices low. However, that's not the case today as the Russian invasion sends wheat futures trading in Chicago to a six-year high.
"I'm not going to put a lid on what might happen," Arlan Suderman, chief commodities economist at StoneX, told Bloomberg. "We could easily be looking at record prices."
Kyiv-based researcher UkrAgroConsult warned, "the chain of product creation, from cultivation to port shipments, is paralyzed."
This brings us back to Goldman's Global Head of Commodities Research Jeffrey Currie, who told Bloomberg TV earlier this month that he's never seen commodity markets pricing in the shortages they are right now.
"I've been doing this 30 years and I've never seen markets like this," Currie told Bloomberg TV in an interview on Monday. "This is a molecule crisis. We're out of everything, I don't care if it's oil, gas, coal, copper, aluminum, you name it we're out of it."
As supplies tighen, the Bloomberg Agriculture Spot Index soars to new record highs.
The disruption comes as global food prices are already nearing record-highs and could soon be catapulted into unknown territory.
I welcome are North Dakota overlords.😏
I meant our.doh.😖
The vast majority of African crops rely pretty heavily on imported fertiliser and pesticides to maintain their yields.
Problem is that 3 big world suppliers of fertiliser (Russia, Ukraine, and China) are either sanctioned, invaded, or blocking exports of fertiliser. I’m not sure of what the situation is for pesticides (I’d need to talk to some friends who would be in the know).
A worldwide shortage of fertiliser both increases production costs and decreases yields so combined with Russian and Ukrainian wheat exports basically stopped prices are going to head up badly.
Oh yeah. Squeeze seems inevitable. But there’s a lot of land that is productive enough to afford extra cost. Doesn’t mean consumers won’t suffer, but mass starvation? Nah.
I’ll believe it’s an issue when the U.S. gubment quits paying farmers to avoid growing crops.
The government has pretty much quit paying farmers to avoid growing crops since during the Regan administration. There was a “Diverted acres” program in which the diverted acres were planted in some unharvestable crop too keep the weeds down and the land became available for ordinary farming in later years. Here in Illinois, the farmers used alfalfa. It was illegal to harvest for hay or seed. The farmers thus cut the alfalfa after it was pretty much done blooming and left it lay. At the time, I had taken up hobby bee keeping and had worked my way up to 15 hives. Due to the timing of the alfalfa cutting by the various farmers, I harvest honey all summer and got about 3000 lbs. Normally alfalfa grown for hay is not a particularly good honey source since the best hay comes when the cutting is done at the start of the bloom. Unfortunately for honey production, the diverted acres program soon ended - the government(mostly Republican administrations)figured out that it was better to raise and sell crops than to do other dumb things. In addition, due to the vast number of acres in alfalfa, a disease wiped out the alfalfa in the next year or so.
To a large extent, the government subsidies apply mostly to crop insurance which is required for participation in the farm program and for Conservation Reserve programs in which the farmers are paid not to farm ground subject to crop failure such as river bottom land.
World wide starvation is off the table. Political troubles caused by sharp increases in food prices in places like the Middle East (a big market for Russian wheat) and some Asian countries is definitely in play.
One issue that has been overlooked is China’s ongoing efforts to rebuild its national pig herd after the 2/3 cull they did 2 or 3 years ago. From what I’ve heard the Chinese are importing all sorts of feed to recover and expand the herd to drive down pork prices.
China will increase its imports of Russian wheat but I’m not sure it will free up alot of otherwise China bound wheat from other countries.
Hogs can also be raised on corn and DDGS, and soybean meal to a lesser extant. Price might rise, but those aren’t going to run out.
True, doubly true as Chinese hogs also tend to get feed that provides all the heavy elements and complex carcinogens a growing pig needs...
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