Ignorance and incentives among the elite political class are leading us away from prudent action.
War and famine are in our future. Putin’s energy shock is becoming a world food crisis. Brace for rationing.
March 4, 2022 — 11.13am
By Ambrose Evans-Pritchard
The world was facing a grain supply crunch even before Putin’s invasion of Ukraine.
https://www.smh.com.au/business/markets/...5a1m8.html
...The world faces what amounts to a commodity “black swan” across the gamut of primary resources. Oil, gas, coal and the “ags” are all spiralling higher together, with metals catching up fast. It is a systemic stagflation shock, an intractable problem for central bankers. It acts like a war reparations tax on the economies of importing nations and is ultimately contractionary...
Record food commodity prices are an ordeal by fire for some 45 poorer countries that rely heavily on food imports: the Maghreb, the non-oil Middle East, swathes of Africa, Bangladesh or Afghanistan. The World Food Programme warned of “catastrophic” scarcity for several hundred million people last November. The picture is worse today...
“Everything is going up vertically. The whole production chain for food is under pressure from every side,” said Abdolreza Abbassian, the ex-head of agro-markets at the UN’s Food and Agriculture Organisation.
“I have never seen anything like it in 30 years and I fear that prices are going to go much higher in the 2022-2023 season. The situation is just awful and at some point people are going to realise what may be coming. We’re all going to have to tighten our belts, and the mood could get very nasty even in OECD countries like Britain,” he said.
Energy and farm commodities are interlinked. Natural gas is a feedstock for fertiliser production in Europe, and lest we forget, Russia and Belarus together account for a third of the world’s exports of potash. Rocketing oil prices are driving a switch to biodiesel in south-east Asia, further tightening the global market for vegetable oils...
Roughly a third of world exports of barley come from Russia and Ukraine combined, 29 per cent of wheat, 19 per cent of maize, as well as 80 per cent of sunflower oil. Much of this is usually shipped through the Black Sea ports of Odesa, or Kherson - scene of hand-to-hand street battles until it fell on Wednesday - or Mykolaiv, where a Russian missile hit a Bangladeshi-flagged bulk carrier this week and killed one of the crew.
“Loading is at a standstill. It is not just the ports: you can’t get a ship in there. Nobody wants to get stranded,” said Mr Abbassian. Lloyd’s List reports that the northern Black Sea and the Azov have been declared “warlike operations areas’, implying double pay for crews, if you can get them.
Insurance rates are prohibitive and banks are refusing letters of credit, even though grains, fertilisers and energy products are exempt from sanctions. Shippers are scrambling to find out what it means for a counterparty to be “connected with Russia”.
Everybody is wary of the US Treasury’s sanctions police, known as OFAC (US Office of Foreign Assets Control). The US law firm Crowell and Moring said clients fear that they may be caught in the net inadvertently, given that targeted oligarchs control much of Russia’s agro-industrial nexus in one way or another. Every transaction has to be screened to the finest detail.
“Russian and Ukrainian wheat are not being offered. Critical corn flows to the world are being stymied. If Ukraine farmers do not plant substantial quantities of corn next month, the supply crunch will be very severe,” said Rabobank.
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