No Minister

Food

with 9 comments

For a guy who is basically in the business of making food I’m embarrassed to say that this news got away from me until now.

The Return of the Third Horseman

As viewed from an agricultural point of view, the world’s largest wheat exporter invaded the world’s fourth-largest wheat exporter. That alone condemns the Middle East to its most volatile and violent period in at least the last century.

One should always be leery of people making apocalyptic predictions; they usually don’t come true.

However in this case there’s a lesson from the recent past:

In 2010, dry weather across Western Siberia prompted concerns about the Russian wheat crop. In preparation for a poor harvest, Russian President Vladimir Putin ordered temporary export limitations for wheat, Russia’s primary agricultural product. Within weeks global wheat prices had doubled; Prices tripled in Russia’s primary export market, the Middle East. Those increases contributed to the series of protests, riots, coups, revolutions and wars we now know collectively as the Arab Spring and the Syrian Civil War.

What’s happening now in Russian and Ukraine is a lot worse than that. Farmers are simply not getting Spring wheat planted, whether for reasons of war (Ukraine) or financial problems caused by the war (Russia). However, the article looks at another aspect, fertilisers, three in particular.

Phosphate: China is the largest producer and they’ve banned its export because they need it for a massive increase in their rice crop to compensate for the massive cut in the number of pigs due to the Swine Flu Epidemic a couple of years ago. They culled as many pigs as the rest of the world has in total.

Nitrogen-based fert. Produced using natural gas. Guess who is the largest supplier? Russia. So a threat to supply, which has already boosted the cost, especially in Europe, where it’s increased five-fold.

Potash: Russia and Belarus have 40% of the global supply.

All of these things can be worked around, but that can take years as new supply chains are created; building new pipelines, factories and so forth – all massive expenditure with the knowledge that if/when the Ukraine War ends and if/when sanctions against Russia end, the availability and price of these things might rapidly return to the 2020 status quo.

Written by Tom Hunter

April 5, 2022 at 9:34 am

9 Responses

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  1. There are several groups that I know of, that were encouraging growing your own food, even before the Russia / Ukraine event kicked off. Food shortages are already happening in Europe

    https://www.armstrongeconomics.com/markets-by-sector/agriculture/food-crisis-of-2021-in-europe/

    NZ will eventually follow the general trend as per usual

    https://www.odt.co.nz/rural-life/rural-life-other/food-crisis-coming-farm-leader-warns?fbclid=IwAR17EyCQ1DcEOzre3O4rwRBaiGK-I0cBeRuaBZbqhXfG2X5xcufnHe7ooi4

    Uncoffined

    April 5, 2022 at 10:16 am

  2. I stocked up on fertiliser a few weeks ago, but might buy some more. At the very least, it might make valuable exchange if things go really bad. Not that my couple of bags would help large food producers.

    Lucia Maria

    April 5, 2022 at 11:57 am

  3. Interestingly enough the USA has exempted imports of fertilizer from Russia from the sanctions

    And even more interestingly they are importing more not less heavy Russian crude, they need it to refine diesel you see – all the while expecting their European vassals to commit economic suicide

    Do as I order not as I do

    Andrei

    April 5, 2022 at 11:59 am

  4. Tom there is an interesting twitter thread out there I cannot find where somebody pointed out that the total of Wheat that is exported is equivalent to only 0.9% of global wheat production.
    Which is to say well within natural variation.
    The fertiliser may well be the same. I have not validated either claim.

    Phil S

    April 5, 2022 at 1:09 pm

    • Interesting. As I said at the start, apocalyptic predictions usually don’t come true.

      Having said that, I hope you read the “Third Horseman” linked article. All these problems can be solved with time – but that still means a butt load of hurt during the transition process.

      Tom Hunter

      April 5, 2022 at 1:17 pm

  5. Yeah I read it have having seen the wheat soundly rebutted the rest of it fell into an Ardenity of doom and fear mongering. With increased wheat prices farmers are going to plant more. Excellent economics 101 in your Work post. The interesting one is the China Pork shortage. China has the worlds largest stockpiles or grains etc which does not suggest they currently have excess unmet demand.

    Phil S

    April 5, 2022 at 4:08 pm

  6. https://wattsupwiththat.com/2022/02/17/u-s-corn-based-ethanol-worse-for-the-climate-than-gasoline-study-finds/
    Abstract
    The Renewable Fuel Standard (RFS) specifies the use of biofuels in the United States and thereby guides nearly half of all global biofuel production, …………………We find that the RFS increased corn prices by 30% and the prices of other crops by 20%, which, in turn, expanded US corn cultivation by 2.8 Mha (8.7%) and total cropland by 2.1 Mha (2.4%) in the years following policy enactment (2008 to 2016). ………..
    very apparent back in 2008
    We found that the RFS stimulated 20.8 billion L (5.5 Bgal) of additional annual ethanol production, which requires nearly 1.3 billion bushels of corn after accounting for coproducts that can be fed to animals (46). This heightened demand led to persistent increases in corn prices of ∼31% (

    https://www.pnas.org/content/119/9/e2101084119

    So, after the conversion of 1.3 billion bushels of corn to millions of tons,
    and finding the current millions of tons exports of Ukraine and Russian Wheat which are expected to be cancelled;
    Perhaps all the USA needs to do is cancel its regulations on ethanol additive to car fuel, and suggest that its pigs and cows change to a diet of corn-based feed instead of wheat-based feed; and there will be plenty of grain to keep the world well fed.
    There was another comment on this a few days ago but I didn’t take a copy of the link.

    Just say’n maybe no need to panic yet.
    W

    walnutter

    April 5, 2022 at 4:50 pm

    • Thanks for that. Rather a lot of people have been aware for some time now that the Biofuel approach in the US has been a bust from all angles (aside from corn growers).

      Even Hollywood. I recall that one episode of season 6 of The West Wing dealt with it. The GOP and Democrat Primaries were happening in Iowa (corn country) and the show’s producer, Sorkin, had the GOP candidate (played by Alan Alda – aka “Hawkeye” Pierce from M.A.S.H.) getting on stage and telling the Iowa farmers that it was a crock and he would cancel it if he got the chance. Every other candidate, from both parties caved and the guy who eventually becomes his opponent in the Presidential Campaign, sits down and privately praises him for telling the truth.

      Funnily enough Senator Ted Cruz did exactly that in the 2016 GOP Primaries in Iowa. Needless to say that in real life he got no praise at all for that. 🙂

      Tom Hunter

      April 5, 2022 at 5:48 pm

  7. It’s pretty obvious that we’re now seeing the downside of an “all in” approach to globalism i.e. letting the market decide is great in theory but hedging bets by preserving a certain level of local providers as a backup may have been a wiser option. Hopefully we will learn from this “teachable moment” and do better in future.

    fredonas

    April 5, 2022 at 7:45 pm


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