Is the Global Food Crisis All it’s Cracked Up to Be?
Another day, another international agreement broken by Russia.
Ukraine was pressured by the West to sign this worthless piece of paper because of the “global food crisis” – which was never anything more than another mass panic, to which Western politicians seem particularly susceptible these days.
I got fooled by this supposed crisis because – just like everyone else – I initially believed what I was being told. But one look at the above chart of the price of wheat and the penny dropped.
On January 24th, one month before the full-scale Russian invasion, wheat futures opened at $802 per 100 bushels. They peaked at $1,342 in early March, but from the middle of May there was a steady and steep decline, and on July 6th (before any hint of a “grain deal” was announced) the price dropped to $787 – back to pre-invasion levels. In other words, the markets got spooked, and have now recovered their senses.
But why aren’t the markets concerned about a crisis? Isn’t it the case that Ukraine produces a large amount of the world’s wheat? Not really. The U.S. Department of Agriculture tells us that Ukrainian wheat production is only 3% of the global total (and I don’t recall that figure being reported in the media). However, due to the geography of the country – with a lot of flat arable land and a climate well-suited to wheat production – they have big surpluses, so they export relatively more than other countries. The figure of 25% of global wheat exports (counting Russia and Ukraine) was therefore not inaccurate, but it seems to have prompted many people to conclude that we somehow had to find a huge amount of extra wheat all of a sudden.
However, in reality we don’t have to suddenly increase world production of wheat by 25% – or anything like it. The actual amount of replacement wheat production would only need to be about 10 million tons, or roughly 1% of world production. But given that the spring wheat crop was planted after the full-scale invasion, when farmers planted more than usual due to the expected demand (as seen in the wheat futures price at the time), there has already been time to adjust. Nevertheless, India has had some problems with production of the spring wheat (after a good winter wheat harvest), and parts of the EU haven’t had a good year.
Thus, the harvest this year will be watched with some interest, but the USDA betrayed no hint of panic when they summarised the situation on July 12th:
The 2022/23 global wheat outlook is for fewer supplies, reduced consumption, higher exports, and increased stocks. Supplies are reduced 1.1 million tons to 1,051.7 million as less production is partially offset by larger beginning stocks.
[…]
Projected 2022/23 global trade is raised 0.9 million tons to 205.5 million as higher exports from Canada and the United States are only partially offset by lower exports from Argentina and the EU. World consumption is lowered 1.8 million tons to 784.2 million, primarily on reduced feed and residual use in the EU and Ukraine.
Essentially, there will be about 0.1% less wheat than last year, but global exports will actually increase by 0.4%. Even the BBC, while trying to sound as pessimistic as possible, can’t conclude anything worse than that there will be higher-than-usual wheat prices that might hit low-income countries.
In the Middle East and North Africa, where many countries import a lot of Ukrainian wheat, they will have to find other suppliers on the global market – which they’ve already had months to do so. But even Egypt, with the largest dependence on Russian and Ukrainian grain, was only importing 10% of their wheat from Ukraine, and it looks like they’ll still be able to import from Russia. Not to mention the fact that they claimed in February to have nine months’ supply stockpiled. And it’s not as though Ukraine has ceased its exports.
At the risk of drawing a comparison to Marie Antoinette, add to all this the fact that it’s not as though the population of Egypt – or of Bangladesh, for instance – are somehow incapable of eating anything but wheat-based products. The only real issue is the price – so perhaps we’ll see more trade in other foodstuffs, as consumer demand for wheat drops.
But none of this has stopped many, including Liz Truss and the former Supreme Allied Commander Europe James Stavridis, from calling for NATO to escort Ukrainian grain convoys in the Black Sea – creating a serious risk of a deliberate or accidental confrontation with Russian naval or air assets, which could escalate to nuclear war. On the other side, the previously-sensible Jordan Peterson has urged Ukrainian capitulation to Russia based partly on a prediction of “millions” dying from starvation.
I think it’s time for a rational re-appraisal of the facts. Let’s call off the mass-starvation panic.
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The political class seem to live from crisis to crisis, real, imagined or just made up. This approach seems to be the one they use for all policy development and department administartion.
The MSM are worse.
And the people lap it up. They can no longer tell reality from fiction, so settle for whatever politicians and MSM tell them via their smart little friend in their pockets – invariably a friend with a smashed face.
The WEF is certainly trying to create a food crisis. Here’s Trudeau acknowledging that food shortages are coming and now he is pushing through “green” legislation that will reduce Canadian agricultural output without cost-benefit analysis.
From a global point of view, the chart on this article doesn’t quite tell the whole story. It’s the price of CME September 2022 wheat futures in US dollars since the start of 2022, and the US dollar index is up 11% since the start of the year, so for people outside the US, the wheat underlying those futures is up roughly 11% year to date, continuing the upward trend from 2021. Since the start of 2021, the price of that wheat has risen 47% for non-US dollar buyers.
The fact that for the past year or two China have been stockpiling a very large percentage of the world’s Wheat / Rice / Grains should tell us something important about what’s to come.
Also the “boots on the ground” view ( I follow a coupe of farmers on YouTube ) is that the gas Shortage / Fertiliser Shortage / Diesel price / Shortage etc will all have very large supply side cost pressure and reduce crop yields over the next year or two. Plus there have been mass crop failures throughout the world this year due to drought and flooding.
Interesting times – watch this space.
My grocery bill is rising steadily and has been for some time. And while free money swilling around has a lot to do with that, there are major supply side issues, in particular due to the price of energy. That same energy price hike hits fertilizer prices, partly due to freight cost increases, partly due to urea being manufactured from natural gas. I doubt Western nations will starve because we can afford to pay. But millions elsewhere will starve. And there’ll be considerably less choice. But for that you’d have check more than the wheat price. As for Russia breaking an agreement one day after signing the agreement, why would they? They’re trying to create a new alignment in global politics. The deal included a joint agreement between Turkey and Russia. Why would Russia damage its relationship with Turkey? Russia has a fleet based in Crimea, not much use if it has to fight its way through the Bosphorus. Cui bono? By the way, while the wheat price may have dropped, it’s still significantly higher than in 2020 when prices were $200 a bushel cheaper. Quote: “Who controls the food supply controls the people; who controls the energy can control… Read more »
Follow up on the missile attack on Odessa. The Russian MOD now claims that they did fire the missiles, and that they were targeting a Ukrainian warship and a warehouse containing US Harpoon missiles.
Other sources suggest that there were four missiles, two of which were destroyed by defensive systems and that the damage on the ground was minimal.
The Turkish defence minister claimed he had been told by Russian officials that they had nothing to do with the missile strikes.