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Putin’s energy shock is becoming a world food crisis. Brace for rationing.
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.
Natasha Kaneva, from JP Morgan, said inventories of tradable commodities are critically low and the world is running out of safety buffers. This is a recipe for “non-linear price increases”, she said.
Unlike the West, China is prepared. It has been stocking up for months and holds 84 per cent of the world’s copper, 70 per cent of its corn and 51 per cent of its wheat. “China has bought enormous quantities of US soy in recent weeks,” said Rabobank. One might ask if Xi Jinping knew something in advance.
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.
‘I have never seen anything like it in 30 years [...] 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 [...].’
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.
Putin’s energy shock is becoming a world food crisis. Brace for rationing.
Shortage of grain and other agricultural commodities means a billion of the world’s poorest people will go even hungrier thanks to Putin’s deranged misadventure, and some will starve. Our next moral mission is to help them.
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