Agriculture and Food: Global Food Chains Face More Uncertainty and Instability | Agriculture

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For the second time in two years, a historic calamity has shown just how fragile the efficiency-driven and deeply interdependent global food system is.

Two years ago, a raging pandemic threatened America’s pantries. Today, Russia’s invasion of Ukraine threatens the supply of key agricultural inputs like fuel and fertilizers while causing deep disruptions in world markets for wheat, corn and vegetable oils. How much, however, remains unknown.

What we do know is that on the export side, Russia and the independent nation it invaded, Ukraine, account for 29% of world wheat exports, 19% of world corn exports and 75% of world exports of sunflower oil.

On the input side, every American farmer knows Russia’s important role in global fertilizer markets. It controls 21% of the world’s potash and, just as badly, its only ally in the Ukrainian invasion, Belarus, has another 21%.

And that’s not all. Russia has a strong hand on both sides of today’s and tomorrow’s energy divide: its natural gas reserves supply the European heating market (at five times the cost of U.S. natural gas) and global heating markets. anhydrous ammonia. In addition, its large supply of copper, palladium and nickel – all key ingredients in the global drive to electrify – is shaking today’s green energy markets.

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“Russia is not a gas station,” a global markets expert said last week, “it’s a commodity supermarket.”

And that’s a huge problem when you live in a politically unstable, commodity-hungry world.

Russia is also an economic basket case. Its GDP, according to the World Bank, is $1.5 trillion, only about 7% of the size of the US GDP of $21 trillion. France’s GDP, in fact, is almost double that of Russia.

Moreover, it is deeply dependent on international trade for food, technology and, above all, finance. The unified and suffocating global restrictions on Russian finance in the wake of the Feb. 23 invasion threaten to leave every Russian and Ukrainian home in the dark within weeks, if not days.

Meanwhile, some U.S. commodity markets — wheat and oil, in particular — are booming. Port closures on Ukraine’s Black Sea are pushing its customers to other exporters. For example, a Twitter post from March 1 stated that “Black Sea wheat is not available to the Chinese for animal feed, so they are turning to American corn, reserve 10 shipments.”

Earlier in the morning, another post urged followers to “Look at soybean oil, then palm oil! It becomes bananas! »

Not all agricultural commodity markets are so fruitful. New crop corn and soybeans, most of which are not even in the ground yet, have kept their bearings. December corn futures rose just 17 cents a bushel. in the first week of the invasion, while new crop soybean futures rose 3 cents. Yet prices are poised to take off if the war escalates.

Futures prices for wheat, a non-feed food grain, rose nearly 20% over the same period, from $7.82 a bushel to nearly $9.20 a bushel. . Drought is also rife in the wheat region of the United States, so today’s wheat market has both foreign and domestic fuel to rise if war and drought persist.

It’s not all clover for farmers, however. Rising fuel and fertilizer prices threaten to add up to $100 an acre to corn planting costs this year, some market analysts say.

Looking around us, however, the non-belligerent nation in the most tense geopolitical zone is neither Germany nor the United States. The nation most threatened by Russia’s unprovoked invasion of Ukraine could be its key ally, China, which is heavily dependent on imports of corn and wheat from both Russia and Ukraine. Russia jeopardized both supplies.

Moreover, China’s only significant political soulmate, Russia, has now been kicked out of everything from global banking systems to regional sports leagues. This decoupling, and the instability that comes with it, is not what Xi Jinping, China’s autocratic leader, promised his nation.

Unlike his Russian counterpart, Xi knows his people want food and peace and little, if any, cares about getting it from the United States, Ukraine or Mars.

The Agriculture and Food File is published weekly in the United States and Canada. Source material and contact details are posted at farmandfoodfile.com.

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