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Is A Food Crisis Coming?

I have found myself telling people around me to expect food shortages later this year and to perhaps even slowly stock up on non-perishables and grow their own food. Many of them look at me as if I am mad. I tell them with inflation as it is, the general situation and the rush to green, it is back to the 1970’s when the average family just about got by. I do hope I am wrong but with battery metal production where it is, I can’t see EV’s being affordable by anyone but the very affluent in the coming years especially as energy and food costs will be a priority.  British farmers are also signalling the impending food crisis. In a recent article from Farmer’s Weekly, the NFU head of food policy, Jack Watts, said “left unchecked, there could be double-digit cuts in output across all sectors of UK food production,”in response to feed, fertiliser, fuel and labour cost increases. That article goes on to state that “Ukraine also grows about 10% of the world’s wheat, and exports have slowed to a trickle since February. Next season’s grain crop is shrouded in uncertainty with men of working age fighting and millions fleeing the country.” It then goes on to look at what is happening in British agriculture commodity by commodity. It is depressing reading.

The fact is that Ukraine and Russia provide over 30% of the world’s wheat supply, just under 30% of the world’s barley supplies, about 15% of the global corn supply, and over 70% of the world’s sunflower oil. Fertiliser is also impacted as about 14% of the worldwide urea market and 21% of the potash market comes from Russia never mind a lot of the natural gas needed to make the fertiliser. These issues along with energy prices are helping drive inflation in much of the western world.

The issue is being felt globally however, in Europe, the impacts may already be seen. Bloomberg recently reported that the Spanish government will allow rationing of some products by retailers, as part of broad measures to cushion the economic impact of the war in Ukraine. “Stores will be allowed to temporarily limit ‘the number of goods that can be bought by a client,’ according to the rule published in the Official Gazette Wednesday. The government didn’t name any specific type of products that could be affected.” Meanwhile, next door in Portugal, Portugal’s Ministry of Agriculture, following news that report the possibility of food shortages and the increase in food prices, said “There is, at the moment, no reason to foresee the possibility of food shortages.” The impacts will be felt differently in different regions around the world.

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Again the story is of supply chain issues, sourcing and so on. For traders and buyers, all types of risk are elevated including operational risks along the supply chain. While the initial emphasis will be on securing supply, those risks need to be managed. Hopefully, this will play out in the form of more expenditure on risk management tools of various forms and on tools to help manage supply chains like commodity management software. Given the momentum of the move to the cloud, one might expect much of this to be in the form of SaaS and cloud-based software. With inflationary pressures aiding greater FX volatility along with underlying commodity volatility, cash flow management will also be a primary concern and one can see that translating into more treasury management and credit risk management software demand as well. One thing that is certain is that this is a market that is difficult to predict from day to day.