As we move into the summer months you may have or think about having a beer on a patio. As you consume the beer you think what are the ingredients and which states did they come from? If you thought about the states of Iowa, Nebraska, Kansas, Missouri and other states in the Great Plains area, you would be correct. The states of the great plains grow the grains which is needed for the beer and the bread you are consuming. In Europe, the vast fertile farmlands of the Black Sea are known as the breadbasket of the world. The farmers of the Ukraine and Russia feed Europe, Africa and Asia.
In an article by Joseph Wilson, Samy Magdy, Aya Batrawy and Chinedu Asadu of the Associated Press, when Russia invade Ukraine, the farmers are no longer working the lands and ports to send the wheat to the marketplace are shut down, what happens?
Russia and Ukraine combine for nearly a third of the world’s wheat and barley exports. Ukraine is a major supplier of corn, the global leader in sunflower oil used in food processing. A prolong war will cause shortages.
In Egypt, the world’s largest wheat importer millions rely on subsidized bread to survive, with about a third of people living in poverty. Egypt’s state procurer of wheat, which normally buys heavily from Russia and Ukraine had to cancel 2 orders in less than a week, one for overpricing, the other the lack of companies to sell their supplies.
African countries imported agricultural products worth $4 billion from Russia in 2020, and about 90% was wheat, said Wandile Sihloo, chief economist for the Agricultural Business Chamber of South Africa. (Russia was trying to break into new markets in Africa, first through food).
Ukraine was Indonesia’s second largest wheat supplier providing 26% of wheat consumed. The wheat is used in instant noodles, bread, fried foods and snacks.
Russia and Ukraine combined for 75% of global sunflower oil, accounts for 10% of all cooking oils according to IHS Markit.
Farmers in the US, the world’s leading corn exporter and a major wheat supplier are watching to see if US exports spike. Ukraine supplies the European Union with 60% of its corn. Much of the corn is used to feed livestock particularly pigs. Russia provides the EU will 40% of its natural gas needs and is a large supplier of fertilizer. In Spain during the first 2 days of fighting, the price of animal feed jumped 10% in the open market.
Linking to dividend paying stocks, all people need to eat to survive and the world producers even though there is competition, loosely work together. After the domestic market is secured, producers look to export markets and it may take years to establish all the relationships in the supply system which seems seamless. At a moment the chain is broken and the stable supply system will take time to fix, if it can be fixed at all. A world at peace is easier than the consequences of a war.
There are more questions than answers, till the next time – to raising questions.