Missing wheat from the war is less than 1% of global wheat crop | Hacker News Reader

Missing wheat from the war is less than 1% of global wheat crop

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219 pointsmooreds201 comments

That's nice and all but it doesn't really help countries like Egypt that import over 60% of the wheat they consume.[1]

[1] https://theconversation.com/russia-ukraine-crisis-poses-a-se...

If the shortfall in exported wheat is ~1% of global production, and farmers in other countries (India, USA) already are planting more to make up for it, what is preventing Egypt and others from importing from those other countries to replace Ukraine/Russian exports?

What am I missing?

Political will, removing subsidies for farmers, logistics of actually shipping wheat, climate change, etc.

> Political will

Of who? Don't the farmers who grew extra wheat want to sell it? Or are you talking about governments preventing wheat exports (I know that has happened in the past).

> removing subsidies for farmers

Not sure how that is germane. What do you mean?

> logistics of actually shipping wheat

That's a great point! Shipping from the Black Sea ports to Egypt/other ME nations is surely cheaper than sending wheat from India/Aus/USA to those areas.

> climate change, etc.

Sure, that's a threat to wheat (and food in general) everywhere and will be for decades. Do you see it as particularly acute/relevant to the current situation? I don't.

How is climate change preventing Egypt to import wheat from India instead of Russia?

By causing a previous rise in food prices in the region, which caused a hungry merchant to immolate himself, which caused widespread protests and, ultimately, unrest including the Syrian war, which allowed Putin to test his air force, creating the smug attitude that he could invade the Ukraine.

The previous rise in food prices also being attributable to the Russian heatwave of 2010 being the link to climate change.

So spring wheat is harvested in the fall, and won't be planted for a little bit in the US, because it's just now starting to get to spring in many states. Winter wheat, which would be harvested this spring, should've been planted months ago.

So there's a gap in production, regardless of where they get their wheat from, I guess is what I'm trying to get at.

From the twitter thread:

> And the world's farmers already started planting more wheat 4 months ago, when wheat futures rose due to possibility of Black Sea conflict.

> India went all-out planting more wheat, looks set to continue a 3yr streak of rapidly increasing wheat exports. The US planted four MILLION more tons more wheat seed last fall than usual. Aus, Canada, Argentina, South Africa, even Brazil getting in on it.

The author's credentials: "I'm Sarah Taber, a crop scientist with 23 years in agriculture. I started out in field work at 14, put myself through crop school, and got a front-seat view of the dirty underbelly of the farm trade." https://www.patreon.com/user?u=5610560

Here are the last 6 years of winter wheat crop reports in the USA [1]. I don't believe that the slight increase in winter 2021/spring 2022 planting in the USA is anything other than a normal variation. I make no claim to know anything about the rest of the world, but I am skeptical that expectations of a Black Sea conflict has anything to do with planting 4 months ago.

PS, you can get even more data, further back in history, directly from the USDA [2], but it is a little difficult to navigate this site. This link [3] might work for everyone, it is a query for acres of wheat planted all the way back to 1919.

[1] https://usda.library.cornell.edu/concern/publications/z890rt...

[2] https://www.nass.usda.gov

[3] https://quickstats.nass.usda.gov/results/64834CCE-2C3A-39A1-...

> Winter wheat, which would be harvested this spring

Since this is a site that cares about accuracy, I'll mention that while winter wheat is planted in the winter, it's harvested in the summer or fall. It doesn't grow fast enough to be harvested in the spring. Instead, it's a way of getting a boost on the season by getting the roots established early. I don't think there is anywhere it can be harvested early enough that one can plant two crops per year in the same field. More details and dates for the US: https://www.machinefinder.com/ww/en-US/faq/when-is-winter-wh...

(If you want to claim that you are technically correct, I'll concede that it is true that hypothetical Florida or Alabama winter wheat might be harvested in May. I hadn't even known that they grow winter wheat there!)

> I'll mention that while winter wheat is planted in the winter, it's harvested in the summer or fall.

Who is harvesting winter wheat in the fall? Even here in snowy Canada it's a late harvest if the winter wheat comes off in August. Mid-July is typical. Spring wheat is a different story.

Hmm. The page I linked shows Idaho, Minnesota, Montana, Oregon, Washington, and Wyoming with a harvest season extending into September. But other than Idaho (Sept 14) not by much. So technically I might be right, but only in the same way that "Spring" is also correct for the deep South.

I had assumed that most of Canada would be later than the Northern tier of the US, but apparently I'm wrong. I wonder if it's because the summer days get longer the farther north you go, and at some point you actually get earlier ripening? Or maybe it's all local weather. In any case, thanks for the correction.

> I had assumed that most of Canada would be later than the Northern tier of the US

It is, but you don't find much winter wheat outside of Southern Ontario, which is actually pretty far south in the grand scheme of things. The most southern end of the province is on the same plane as California.

The Canadian prairies, where most of the wheat is grown, are all about the spring wheat. That's typically a September harvest.

> Idaho, Minnesota, Montana, Oregon, Washington, and Wyoming

Only one of those states is not contiguous with Canada. Given much of the same environment, they share a lot of the same farming practices as western Canada. In other words, your dates no doubt include spring wheat, despite what the opening section of the document says. This explains the wide variances (July - September) in some cases, with winter wheat being the early crop and spring wheat being later.

The author frames the problem less as a wheat production problem and more as a shipping problem.

> Again, specific places are facing EXTREMELY REAL wheat supply problems. MENA usually sources from Ukraine. Switching supply chains to India & other sources takes extra time, & if they're further away from India and Ukraine, it takes longer for supplies to get there.

FYI, MENA = Middle East / North Africa

> What these places are facing is a SHIPPING shortage. Not a lack of enough wheat in the world. Their food supply chain problems are still dangerous. A local, shipping-induced shortage that lasts a week can still kill you.

A sincere question:

Would it not then be helpful to support these new or temporary supply chains as a war effort? Shouldn't that fall under humanitarian aid?

If the shortages are in rail lines, grain elevators, shipping terminals, bulk cargo ships, etc...no sort of "support" can create those at all quickly.

Trucks. Lots and lots of trucks.

Leaving aside the issue that trucks can't move stuff across oceans, how do you get the extra trucks to where they are needed?

As a Romanian I visited Lviv a few years ago. There were some disaster potholes right past the border. It took 1 hour to go through say, 10km with a small car. Unless those roads get fixed, I expect only military or otherwise rugged trucks to be able to pass quickly. Otherwise, you'd need a lot of trucks to get a significant flow of goods.

Example:

https://www.google.com/maps/@48.0388842,22.9469939,3a,75y,33...

Ah, looks barely worse than roads in the Silicon Valley. Maybe that's why everybody drives SUV and pickup truck over here.

That's why the Russians de facto imposing a blockade on Odessa and generally speaking on the Ukrainian ports at the Black Sea is so important to them.

Also Romanian in here, from the Southern part of the country where we happen to grow lots of wheat. We're also close by the Danube, which helps a lot with transport (companies like Cargill have invested massively during the last decade in here).

Cargill is in the running for world's most evil corporation. Competition is stiff and enthusiastic.

Nestle? BASF/Monsanto? Exxon? CCP? Halliburton? We might not recognize the name of the leader.

Probably helps that they're in private hands, which I don't know how they managed to do for so long.

Lots and lots of snorkel kits.

Ships

Not sure about the EU, but the US has a massive truck driver shortage already.

Is there really a shortage or are salaries just not high enough to attract candidates?

Agree.

If the options are:

- kill more people to end the war and return wheat supply

- send more people to potentially die while killing more people to end the war and return the wheat supply

- or pay more to get wheat to where it needs to be to ensure other people don't die of starvation during this war.

I truly wish that the answer was: - pay more people to get wheat where it needs to be

I think China may step up here, as it is a great opportunity to promote their One Belt, One Road Initiative. And they will be one of the countries with excess wheat to sell. And it will make Australia look stupid if they have wheat but no boats and no signature on the agreement.

Another step up opportunity for China would definitely be problematic for the US

Problem for US hegemony. For the US, its likely a net benefit in that in buying cheap Chinese wheat, those consumers will be more able to afford expensive american ones

Agreed, and that cheap chinese wheat would be a massive problem for US hegemony on which many, many things in the US and adjacent economies rest.

Yeah...I was thinking ships from India and trucks from the east for example.

The physical wheat may exist, but it may not be possible to supply it at the same prices (especially given increased transportation costs due to energy prices). There may be no physical shortage, but if prices for wheat increase 50% in Egypt then many people will go hungry.

> and farmers in other countries (India, USA) already are planting more to make up for it

Are they? Fertilizer prices are up 3x-5x, depending on where you look, due to Russian export restrictions, so for many farmers it's cheaper to wait it out and give the soil a rest.

Planting reports have only started trickling in, so we don't have a good global view of what has been planted in spring 2022.

Most wheat was planted 4 months ago, according to the author.

Contrary to what the US media and current US administration are saying, we had major issues before Russia invaded Ukraine. This idea that the Russia invasion is responsible for all these problems is ludicrous. Yes, it has made them worse but it is not the root cause. The fertilizer shortage was happening at the end of last year. You know the 4 months ago you quoted.

https://www.theguardian.com/environment/2021/nov/25/fertiliz...

Some farmers were delaying buying fertilizer, according to that article. Nothing in that article indicates that they were not planting because of a "shortage." Prices were simply higher and some people were betting on them going up and some were betting on them going down.

I'm in agreement with the idea that this isn't primarily caused by Russia's invasion of Ukraine. Read the author's other thread on fertilizer for more context on that.

She says it's primarily a shipping problem, not a production of fertilizer problem. Which tracks with the idea that this is simply another example of the global supply chain snarling things up.

> so for many farmers it's cheaper to wait it out and give the soil a rest.

If you play your cards right, and Mother Nature plays nice, this could be the most profitable year of farming seen in a long time. Costs are up, yes, but the income potential is up even more. Why would anyone choose this year, of all years, to "give the soil a rest"?

Because you need the cash up front to buy the ingredients - seed, fertiliser, diesel - all more expensive than last year. (Not saying you’re wrong though.)

The land is going to be your largest expense in the typical case. If you truly can't come up with the money for inputs, how are you going to carry the land? You can often push your land costs until after harvest, but if you don't have the harvest to pay for it... And if you know you won't be able to put a crop in due to budgetary constraints, why wouldn't you rent it out to another farmer? There are lineups of hungry farmers ready to spend whatever it takes to find new ground to work.

I find it hard to believe that land is going to lay fallow this year specifically because of what's going on. Certainly people are adjusting what they plan to grow to optimize for the situation. That is definitely happening.

That is the easy part, any farmer these days is already selling their crop before it is planted. They let investors and insurance take the major risk, between the two they are guaranteed to break even, and if there is anything left over because of a good year (there normally is) that is profit. if investors are not willing to buy their expected crop at the price needed to break even the farmer doesn't plant at all.

With the high temps at the poles this year already. I have my doubts that Mother Nature is going to play nice.

Wheat is a winter crop in India FYI, a lot of the mass grain production switches to rice in the spring/summer season.

By the same Dr Sarah Taber: https://twitter.com/SarahTaber_bww/status/150780888453416961...

>What am I missing?

Shifting suppliers on this scale in normal times isn't a quick process. Right now global logistics are still a complete & total mess.

With great uncertainty, $cost becomes somewhat disconnected from supply. Right now futures are up about 40%. Availability won't mean much if it isn't affordable, and countries need to lock in supply because it's not really a JIT distribution system (see previous point on logistics). If the war has disrupted your deliveries 3 months out, you need to lock in new contracts now (if not 3 months ago) to keep supply moving.

Grain is shipped in large specialized dry bulk cargo ships. It’s a lot closer to ship from Ukraine to, say, Egypt than to ship from Australia or Canada or even India. If you ship your grain N times farther, you need N times as many ships to make the same number of trips. Those ships don’t exist or can’t be mustered on short notice, so you have to use some other kind of (less-specialized, less efficient and more expensive) shipping.

Even if you can manage to get all of the grain where it needs to go on new routes, the price of grain is going to go up substantially in places previously importing from Russia/Ukraine, and the logistical changes will cause second-order disruptions to other global shipping.

Thanks for the added detail-- I wasn't aware of details specific to the Ukraine <-> Egypt supply chain, and this demonstrates extremely well the difficulties of shifting supply sources.

If anyone else is wondering, the largest ships carry 300,000 DTW, which is 300,000,000 kg each of which has 3400 kCal. Daily caloric intake of 2,000 may be suitable average, meaning that one ship can supply all energy needs for 1.5 million people and one year.

(3700 * 300000 * 1000) / (365 * 2000)

Keep in mind that grains are not only used for human consumption though. It's also used for animals. Egypt has 10M cattle alone [1] and a 1,000lb animal needs roughly 7x the calories as a person. [2] So that same largest cargo ship will only feed about ~200,000 cattle, requiring 50 such ships to feed the cattle population.

They produce about 1.8 billion heads of poultry [3], and in total only about 1/3 of their animal feed requirements are produced domestically [1].

Animal feed appears to be in a different category from other grain imports for human consumption, probably because it really is a separate product containing a mixture of grains and nutrients from other sources. Unfortunately though, much of it is also imported from Ukraine [4] which has banned all exports of grains for now, and it's probably a reasonable assumption that this will include grains used in animal feed, since the issue is the food security of their own people.

Eqypt is going to need a lot more newly-sourced grains or grain-based products, a large # of container ships full of it.

[1] https://apps.fas.usda.gov/newgainapi/api/Report/DownloadRepo...

[2] https://cals.arizona.edu/forageandgrain/sites/cals.arizona.e...

[3] https://crimsonpublishers.com/cras/pdf/CRAS.000502.pdf

[4] https://www.feednavigator.com/Article/2016/09/19/USDA-Egypti...

I mean, that is just an advertisement to reduce meat production and focus on starch based calories for humans rather than supplying to inefficient meat production.

I was thinking much the same as I wrote it, but didn't want to overburden an already long comment. Here though, I'll say that large cattle consume about 30 calories for each single calorie their meat will provide. Poultry seem more like 10 to 1.

I'll own up to some level of hypocrisy on this as I am not a vegetarian, but I also won't complain much if further population growth makes meat consumption unsustainable when it means people starve. (I don't think we're there yet: world hunger right now seems to be more about other factors, economical and otherwise. I'm open to opposing viewpoints on it though)

While the largest bulk carrier ships can indeed carry 300,000 tons of cargo, these ships are usually used to transport iron ore or other ores. It is very rare that wheat is transported on ships that carry more than 70,000 tons. The main reason is that neither origin or destination port logistics allow for larger shipments, and most buyers cannot store such large quantities of wheat.

It seems that ships need to be specifically fitted out for something like grain transport as well. I'm sure there can be some reworking of things but it's bound to take time and resources and further boost cargo prices, and slow down on/offloading at ports and create additional bottlenecks.

I'm tentatively optimistic that this situation isn't going to mean mass famines, but there will be a significant monetary cost and likely some human cost as well.

> If you ship your grain N times farther, you need N times as many ships to make the same number of trips.

Which would be really bad if it was a global increase, but when it's a tiny sliver of the market you only need a sliver of spare capacity.

>you only need a sliver of spare capacity

If there was spare capacity, but there doesn't seem to be much at all. 1 in 10 inter-country wheat shipments will be Ukrainian, and it's about 1 in 7 for corn, probably other crops as well. Repurposing that shipping capacity isn't easy either, from a logistics standpoint. It can take up to a month just for a ship to cross the Pacific, before any other route complexities. It doesn't help that there's over 100 such cargo ships tied up in Ukrainian ports either, a decent proportion of which will be the subset of cargo ships fitted out for bulk grain transport.

The last few years have already shown us how delicate the global logistics & supply chains are. It doesn't take much to stretch them near to the breaking point, and we're already close to that point.

Most world grain is shipped short distances within countries (by rail, truck, canal, ..) and consumed locally. Only a small proportion is shipped internationally, and usually the shortest possible routes are picked (because that is cheaper).

Entirely taking out Ukrainian grain shipments is not a small sliver of the total amount of long-distance grain shipping, but instead requires a significant increase in the total deadweight-ton-miles. We are talking about taking 10%+ of international wheat/corn/barley trade and making it travel 3–6x further than it otherwise would, in an industry that usually runs on thin capacity margins. (Disclaimer: I am not an expert and have not done a detailed calculation.)

That is a potential logistical nightmare. Hopefully smart people with the power to make large temporary changes are working on ameliorating the pain and keeping everyone fed.

> What am I missing?

Logistics.

Food scarcity is a problem not of supply but of transport. More wheat in the American heartland doesn't help Egypt if every truck, ship and port is booked out for six months. More rice produced in India doesn't help if half of it rots en route to the city.

This famine is primarily a logistics problem not supply.

Presumably they already bought wheat futures for a significant fraction of demand, and so it is up to the sellers to organize the actual wheat, possibly at a loss.

They have 4 months worth of strategic reserves and I read somewhere planned deliveries will bring that up to 8 months worth. I think the danger is in future if those 8 months worth get burnt through and replacements don't come. That's still an unknown at this point, but it's what I'm personally watching out for in terms of being able to see around the corner to what may be coming next.

As an aside, I found that fascinating that Egypt is such a huge grain importer.

In the ancient world, Egypt was one of the largest grain producers and basically fed the Roman Empire.

https://en.wikipedia.org/wiki/Demographics_of_Egypt#Vital_st...

Looks like the population went from ~15.4M in 1934 to ~100.5M in 2020. I'd bet that neither the area devoted to agriculture, nor the productivity (per unit area) increased by anything resembling that ~553% increase.

Probably it did. It did in the US over that time. Modern farming practices raised yields on some crops from ~20bu per acre to around 200 today.

Perhaps. But to skim over Egypt's economic history - https://en.wikipedia.org/wiki/Economy_of_Egypt#History - their only substantial exports, back in the 1930's, were agricultural products. I'll guess that the British Empire was not generously subsidizing Egypt's food imports then, nor were there millions of free-spending tourists to be paying, nor...

Edit: Okay, perhaps Egypt had replaced many of its wheat fields with cotton fields by the 1930's, and was buying food with the cotton money. The British cotton industry might have loved that...but "massive food imports paid for with a cash crop" is a dangerous strategy to play long-term, or on a national scale. And Egypt threw off the last of the British yoke in the mid-1950's.

She talks about this further down in the thread, making it her main point:

and

> To solve that problem, we gotta start with being clear on what the problem IS!

> We haven't! We decided it's a wheat shortage, not a shipping shortage.

> So investors panicked, drove up the price of wheat, & made it even harder for these places to get new import shipments launched

That is ironic given they where the grain suppliers of ancient rome? [1]

[1]https://en.wikipedia.org/wiki/Cura_Annonae

Why is it no longer possible for Egypt to grow its own wheat?

They do, but their population has also ballooned far past what their own agriculture can supply.

Slightly informed guess is that the highly productive but water-constrained farmland of the nile valley is better used for value crops, like fresh fruits and vegetable, than a staple such as wheat which is more cheaply grown elsewhere.

Edit: there’s a great writeup about “hoop” style greenhouse farming there and how productive and water efficient it is… but the article escapes me presently

Edit2: ah! Here: https://www.nytimes.com/2019/07/30/dining/norwich-meadows-fa...

Egypt is mostly desert, the only arable land is on the banks of the Nile.

While I was there this winter, I saw huge new plantations of dates? or palm (oil)? in the western desert sucking up the underground aquifers....fields with cows grazing there... also they're probably growing wheat....doesn't look sustainable but what do I know about the politics of economic corruption.... bread is dirt cheap, it being a bit more expensive might lead them to improve their diet somewhat... I mean their dates are fabulous...

There are probably some plants that grow better in Egypt than any other place. "Comparative advantage" makes you eternally dependent on the benevolence of other nations because wheat is more important than dates. The idea that Egypt has the same negotiating power as the wheat exporting nations is laughable.

In principle, one could attempt a afforestation project in Africa and it would pay dividends over centuries, but the current system doesn't reward longevity or sustainability.

There are far, far too many people in Egypt. Egypt has had plans for decades to irrigate large parts of the desert to help solve the problem, but so far it hasn't gotten much further than the planning stages.

Egypt gets most of its food aid from Saudi. Saudi is entirely reliant on wheat imports and tried to grow wheat in the desert to no avail.

In the past decade, Egypt has been reliant from Saudi, UAE and Kuwait. This has always been so.

According to Reuters, Saudi Arabia produces 2.5 million tons of wheat annually, enough to meet domestic demand.

https://www.reuters.com/article/idUSL08699206

That article is dated 2008. Since 2016, they stopped all wheat production in Saudi Arabia.

From the same 2008 article: https://mobile.reuters.com/article/amp/idUSL08699206

[..] The kingdom aims to rely entirely on imports by 2016.

"The reason is water resources," said one official, who did not want to be identified.[..]

https://www.world-grain.com/articles/15070-saudi-arabias-whe... - 2021 article

There is a lot of chatter about abundance and technology..but the harsh truth that everyone ..esp those whose voices get amplified ..is avoiding is that we simply don’t have enough sustainable and renewable resources to feed 8 billion.

When the expected depopulation curve occurs in 2050ish, hopefully we wouldn’t have depleted all our natural resources because in the next 100 years, there will be far fewer humans and not enough resources to sustain them.

We have far surpassed carrying capacity. The world can bear about 1-3 billion max. Instead of trying to breed ourselves to extinction and stripping the world of natural resources by running faster to stay in the same place, we should focus on life extension and preservation of human genetic material for future propogation and perpetuation of the human species. It’s the smart thing to do.

In general if you were to take away synthetic fertilizers and rely only on traditional agriculture without over-pumping water from aquifers you start to realize that the population of planet earth is only possible to sustain at its current levels with the current system and if/when parts of that start to go away then some of the people start to go away too.

The current situation highlights the reliance also on global supply chains functioning properly. These are fun times.

It sure does and the article explains it (it’s a transport issue not a supply issue, as the growth in wheat production this year will exceed the shortfall).

Egypt - arable land 2.9 pct (more or less constant from 1961). Population - 105 milion (1961 - 26 milion).

https://www.worldometers.info/world-population/egypt-populat...

https://data.worldbank.org/indicator/AG.LND.ARBL.ZS?location...

It makes a big difference everywhere else, though.

I personally know people in the US who are buying large quantities of wheat and other food in preparation for the pending food crisis. They expect food prices in general to go through the roof because 1/4 of the world's wheat has suddenly gone missing.

While there will be famines because of this war, if Sarah Taber's numbers are accurate then the reporting within the United States has been horribly irresponsible, and it's important to call it out and spread the real numbers.

On a side tangent, wasn't Egypt the bread basket of rome? What happened there? Did the Nile dry up?

The point is the economy is currently based on something hits the news, hoard hoard hoard, price explodes, empty shelves and high profits.

Happened to TP a couple years ago and is in process with microcontroller chips and will be happening soon with food.

People hear story on news, think there will be empty shelves, buy a multi-year supply of boxed Mac n Cheese, the shelves are indeed empty, more people think there will be more empty shelves, repeat.

I know a small time ham radio kit mfgr whom bragged about blowing the cost of a new house on a shipping pallet of '328 chips because he has to secure his supply chain if he wants to eat and everyone knows the shelves will soon be empty. Of course that has three effects: He has to store and finance a four year supply of chips, he total wiped the supply in his home country so nobody in that country can buy a '328, and he's stuck using a 2009-era chip until at minimum 2024, when his competitors will be shipping products based on early 2020's chips. On the positive side he gets to eat while competitors whom didn't hoard can't ship product. Of course the only reason there is a shortage is because he cornered the market before someone else did it.

I absolutely guarantee we have more than enough wheat to continue to set new record levels of obesity; while I also guarantee there will be empty food store shelves in the near future.

> The point is the economy is currently based on something hits the news, hoard hoard hoard, price explodes, empty shelves and high profits.

Given that that extends well beyond individual behaviour (Wheat futures[1] are currently bonkers), this raises the question if the claim that "capitalism is the optimal way to allocate resources" is really true at least for the current version of capitalism.

This extends well beyond wheat. Market behavior is often completely irrational, for extended periods of time. The idea that "all information is priced in" extends to entirely made up information of any kind, which, given technology's ability to proliferate information, now means it often outnumbers actual information significantly.

This means that the markets often don't reflect a fair price for the product any more. They instead show a price that is an excellent representation for human emotions around the product.

That does not seem a sustainable principle, in the long run.

I wish I could close with a lovely "and here's how we fix that" paragraph, but it's a problem that leaves me stumped.

[1] https://www.cnbc.com/quotes/@W.1

>this raises the question if the claim that "capitalism is the optimal way to allocate resources" is really true at least for the current version of capitalism.

It is important to remember that economic supporters of markets don't claim that the markets are always rational in the short term. Corrections and irrational behavior expected.

Yes - but we're currently in a situation where irrationality absolutely dominates. (And it's not exactly short term)

Yeah, I agree that irrational behavior sucks. But this brings us full circle to your OP, and the lack of a better alternative.

You seem to be claiming that the prices of many different assets are largely divorced from fundamentals.

I'm willing to believe you, what you're saying is plausible, but I apparently haven't been looking at the same data you've been looking at.

Do you have examples of some prices you think are bonkers, and reasons why they're bonkers?

> that the prices of many different assets are []largely divorced from[] fundamentals.

Actually, I think the claim is that prices are driving fundamentals rather than vice versa - ie rather than "$STUFF shortage causes rising price", you instead get "rising $STUFF price causes shortage".

Note that derivatives like futures add additional layers of emotion over the cash market.

In the cash market, prices are generally set to match supply and demand of the actual physical thing. Supply is what it is, and demand can go crazy in mysterious ways.

In a derivatives market, prices reflect the supply and demand of promises and expectations of the physical thing. You're buying and selling a completely abstract entity only loosely coupled to the physical thing. Here both supply and demand are driven by all sorts of mysterious whims.

Not to mention that derivatives markets tend to be designed for speculation.

Why is the "fair price" not significantly higher than it was 2 months ago, for short-dated futures? Supply is temporarily disrupted, all input costs are significantly higher, and it's a very inelastic market because elasticity comes from mass starvation. You can say the move was an overreaction - but it's pricing in many unknowns, the probability of which are certainly not zero. What if Russia banned all grain exports, for example?

I guess markets are functional proportional to their level of certainty with respect to future events. Information is a reduction in uncertainty, so if you are missing information you need in order to make pricing decisions because it's at this stage unknown, then you have no rational basis of which to act, but since you still need to act the only way to do so is irrationally. Makes perfect sense to me.

TL;DR sometimes markets fail. Also all complex systems are nearly always in a state of partial failure. Economy is no different.

>Given that that extends well beyond individual behaviour (Wheat futures[1] are currently bonkers), this raises the question if the claim that "capitalism is the optimal way to allocate resources" is really true at least for the current version of capitalism.

It works, if the good in question is not needed to satisfy a basic human need. It also works, when the good in question can be produced so that everyone has enough.

It doesn't work, if there is a sudden temporary loss of production capacity or if the production capacity can never catch up to demand (think how we can't make more land, it's already there).

Thank you - that's actually a really valuable distinction/framing.

(I'm not sure I 100% agree, but it poses a whole nest of interesting question when applied to various economic situations.)

The difference is that unlike microchips, wheat can't be stored indefinitely. Eventually it rots. And reserve storage capacity is very limited; they have to make room for the next crop. The worldwide wheat market is huge and fragmented so no one can really corner the market through hoarding. An electronics manufacturer might not be able to easily substitute a '328 for another microcontroller, but an Egyptian baker can easily substitute French or Indian wheat for Ukrainian wheat as long as the transport can be worked out at a reasonable cost.

Wheat properly stored keeps for at least thirty years without noticeable degradation[0]. I'm not sure how easy that is at scale, but on first glance it seems not impractical.

[0] https://extension.usu.edu/preserve-the-harvest/research/stor...

It's easy to store small quantities of wheat for years at home, but that's irrelevant to this situation. We're talking about grain elevators and warehouses.

I'm not convinced that an airtight grain storage facility filled with carbon dioxide is impractical. A quick search turns up several manufacturers of airtight grain silos.

In fact, you don't even need the silo to be air-tight: moisture is the enemy. If you can keep you silo dry (including when air temperature change, which is really the only challenge you would face, for example in the ancient world), you're good[1], it won't rot.

Humans have known how to keep wheat for several millennia !

[1]: at least if the goal is to eat the wheat. Replanting the seeds will become much harder after time passes.

These places have regulated hygrometry for exactly this reason.

The type of places at risk of food shortages don't necessarily have wheat storage facilities with regulated hygrometry. Developed countries will be fine, and have facilities for long term grain storage. It's the poorest countries that will be hit by rising wheat prices and intermittent shortages.

> The type of places at risk of food shortages don't necessarily have wheat storage facilities with regulated hygrometry.

First of all you're moving goalpost here, the thread started with a discussion about how some people can hoard a huge amount a microchips or wheat to make big profit, there's no reason for this hoarding to occur in developing countries (and in fact it's more likely to happen in countries where capital is flowing, for such a speculator to invest).

Then when we're talking about countries that import wheat, that means taking wheat from tankers in big ports, not some remote rural places with no electricity or running water. In countries that import wheat, Middle East and North Africa that is, theses facilities are critical to the mere survival of the population, so of course they have access to at least the early/mid 20th century tech which is all you need…

> unlike microchips, wheat can't be stored indefinitely

I'm actually unsure which depreciates quicker: wheat or silicon? On one hand, wheat is perishable. On the other hand, silicon becomes obsolete.

Well the PS4 was released in 2013 and still plays modern games, sure they could look better and run faster but it gets the job done.

What we know says that obsolete silicon trickles down to poorer countries, e.g. the early 8-bit microcomputers saw continued use in the former Soviet states into the mid-1990's, a full decade after obsolescence had started to hit in North America with the introduction of 16-bit machines.

Of course, there's some leapfrogging that also takes place. Most of Africa jumped straight into adoption of mobile phones without really going through an era of cheap consumer micros.

Absolutely, and it's not just limited to wheat; prices are up across the board even in industries with very little presence in Ukraine or Russia.

I read this thread a couple days ago and managed to get through it despite the annoying tone.

I think the author is correct now (for the current and upcoming crops) but I worry they're failing to account for larger systemic issues like fertilizer price spikes (and yes I read their fertilizer thread as well), currency issues (inflation, logistics of precursors) and while they acknowledge the shipping issues can kill people they sort of hand wave over it.

I'll admit I'm old and generally just get mad at ideas that challenge my assumptions, but after reading this I'm not ready to believe everything is fine. You have a country torn apart by a war that seems far from over, massive reorganizing of the global supply chain to cut out Russia, and world economic instability as we seemingly hasten the weakening of the USD. The author raises good points but I don't believe everything is fine.

The author does not say everything is fine, she says the public focus is in the wrong place. We don’t need more wheat, we need changes in shipping. We need to fund logistics, not planting.

Or maybe we need to stop relying on globalized markets for vital production.

A country is really sovereign if it produces enough food for its own population.

One of the main reason of the food dependency of Northern African countries is ... the EU policies.

Huge amounts of public money are given to farmers each year so that their selling prices are competitive on the global markets.

Those global prices are lower than local production cost in Northern Africa.

So the European Union basically made these countries dependent through its agriculture policies.

Egypt has also a very large population for its very limited arable soil. But Algeria, Tunisia, Morocco have plenty land and water enough to feed their population. And yet they are dependent on food importations to survive.

So the Egyptian case is specific and hides a larger truth. Many West African countries are dependent as well to subsidized European meat. Local farmers can't compete.

Each country should be allowed to put tariffs on food importation high enough so that local production is enough to feed the country.

The USA, Brazil, Argentina, Australia, New Zeland, Ukraine, Russia and the EU just won't allow it.

The EU put a large fight to protect its farmers against competition from the aforementioned countries. And that was and still is a good strategy. But it goes too far, as described before.

We need to stop building such a fragile global economic system. Free markets are simply NOT efficient to ensure access vital goods and services.

Self-sustainability for vital needs should be a priority, at a minimum on the country scale, but the smaller scale possible is always preferable: that's resilience, hence sovereignty.

Food, water, shelter, security... and love are the humane true necessities. A country should be able to guarantee this to its population, whatever happens : large war, pandemy, unseen solar eruption that kill most electronic devices, extreme and unseen natural disaster due to climate dereliction.

We are not ready to face uncertain times.

It's also stunning to think about how many people legit rely on humanitarian aid to stay alive, and if things break down to the point where that starts to dry up then that has a big effect on those populations.

Wait, isn't there a contradiction here? You said countries need to protect their agriculture to remain sovereign, which is what the EU is doing. Then you blame the EU for protecting their agriculture. Which is it?

> Wait, isn't there a contradiction here? You said countries need to protect their agriculture to remain sovereign, which is what the EU is doing. Then you blame the EU for protecting their agriculture. Which is it?

I get your point. The issue is the hyper-productivism of the EU's agriculture. Public money, e.g. the citizens' money, is used to ensure revenues to farmers. I have no issue with that. But since that money is public, it is supposed to serve the general interest.

The EU could decide to encourage organic farming rather than industrial agriculture based on Monsanto seeds and pesticides. The latter make possible high levels of production, but to a huge cost for biodiversity and even climate dereliction. And it destroyed agriculture of subsistence, forcing them to specialize in monocultures like banana and chocolate.

We pay our farmers to destroy our ecosystems, polluting the rivers, with proliferation of a green algae on our beaches which vapors can kill a man. So public money is spent to clean the beaches to protect tourism. Farmers themselves have health issues since they are exposed to high levels of pesticides.

All this because the EU, and especily France, need to export food for its commercial balance, instead of producing high quality food for its population.

20%/of pesticides in France are used on the vineyards, which amounts to 3% of the agriculture surface. Around Bordeaux, pesticides are found within the children hair - meaning it is ingested by merely respiring.

The "good part" of maintaining African countries dependent for basic food is to keep them producing what we made them produce during the colonozation., e.g. exotic fruits, coffee, chocolate etc.

The US does just the same. Cereals are heavily subsidized and the same dependency is organized to keep Central & South American dependent for basic food. The soils of the great plains of the Midwest are being mistreated to the point of desertification. Well, with enough water, huge amounts of fertilizers and pesticides, the industrial agriculture still works, even if the yields are on a diminishing trends. But the climate dereliction imposes o the US larger and longer droughts every year.

Food sovereignry is important, but preserving fertile soils in the long term is a must. Biodiversity enablea an ecosystem to adapt to a changing climate, to some extent. Nowadays, the change is far too fast to allow Nature to self-regulate, e.g. to keep the soils alive by the natural selection of the adapted species.

American billionaires are no buying huge pieces of preserved land in New Zeland for no reason. They know. No that it is difficult to know, we just prefer to ignore it.

It's like Putin's threat on Ukraine or the emerging imperialism of China. We all know but don't act accordingly.

The Covid pandemy is the direct consequence of industrial meat production. Too many animals concenteqted on small surfaces in the name of productivity, in contact with humans. Virus emerge, some kill the animals, like the avian flu, and some jump to men, in general indirectly through bats or pangolins or rats ...

If that Chinese lab in Wuhan was studying coronaviruses, it's precisely to have vaccines ready for the pandemies that will inexorably happen since we don't want to change our agricultural practices.

Many scientific reports are gloomy, like the IPCC, because the numerous meta-anaysis of ten out thousands of studies give us a very clear picture of what is happening (the 6th great extinction of species on Earth) and the climate dereliction. 50ºC temperature in Australia, in the Middle East are now annual. Droughts in the US and Europe, huge fires evverywhere.

We are stupid. Big money make people believe in the virtue of free markets to ensure the public good. It just ensure that the 1% get always richer and the 0.1% doubled their fortune thanks to Covid, in less than 3 years. And people turn to billionaires like Musk to save the world(as if he cared) or to populists with anti-liberal agenda, on the far-left (Chavez) but more often on the far-right (Trump, Putin, Bolsonaro in Brazil, Modi in India, Orban in Hungary, neo-fascists in Italy, Christian-nationalists in Poland, Erdogan in Turkey ... just to name those who were.elected).

Sorry for the gloom, I just don't see a way out since democracies are failing to put in power the right leaders. At best, we have some Obama, Biden or Macron, who are not bad guys but in the end, do nothing to correct the economic system. Our democracies keep electing people who protect the 1% class they belong to. So more and more popular and middle class voters elect far-right leaders who have no solution but the hate of their scapegoats of choice.

Clearly, the way ag subsidies are done is largely down to corruption, essentially politicians chasing votes from farmers/rural areas, as well as being bought by the ag lobby.

I wish to challenge two things you've said, though.

> The EU could decide to encourage organic farming rather than industrial agriculture based on Monsanto seeds and pesticides. The latter make possible high levels of production, but to a huge cost for biodiversity and even climate dereliction.

I hear alarm bells when I hear people criticizing "Monsanto seeds" and "pesticides". It reminds me of activists who are detached from practical trade-offs or who've bought into woo around GMOs. As if organic pesticides are much better or proven to be much safer? And if they are slightly safer, who is to say the current consideration of trade-offs is wrong? What's wrong with Monsanto seeds?

> Cereals are heavily subsidized and the same dependency is organized to keep Central & South American dependent for basic food.

I am almost certain this is false. It's attributing calculating, conspiratorial malice to forces that can be easily explained by the stock standard self-interested behavior of politicians and an industry lobbying group.

A 1% decline in supply can have an enormous impact on price, because price is set at each instant by the marginal buyer and seller.

For every 100 buyers (people) used to buying (eating) wheat every day, there is now only enough wheat for 99, on average. Wheat prices will therefore rise until 1 out of every 100 buyers cannot afford to buy their usual daily purchase of wheat. On average.

> marginal buyer and seller

Yeah, but are end consumers actually buying wheat at the margin ?

> are end consumers actually buying wheat at the margin ?

Yes, everything transacts at the margin.

The margin shifts for each step in the supply chain in order to pay for the work done in that step. And earn a margin on that work.

>A 1% decline in supply can have an enormous impact on price, because price is set at each instant by the marginal buyer and seller.

I think this is where "elastic" vs "inelastic" demand makes a big difference.

Wheat doesn’t strike me as hugely inelastic. There are lots of alternatives. Sure, bread makers might pay double for wheat, but won’t a consumer just switch to potato bread or go for rice or mashed potatoes instead ? Ultimately the end consumer feeds the consumption engine, and they’re price sensitive especially when there are tons of alternatives.

I don't understand why she mentions "most of the world plants wheat in the fall" if, as far as I understand, Ukraine plants their wheat in the spring. Since 1) we're in the middle of their planting season 2) Ukraine produced 40 million tons of wheat last year 3) Given the current situation it's very hard to predict how much wheat will be successfully produced this year - It looks like the majority of farmers won't be able to grow their crops - how is she so sure about the 7 million ton shortfall figure? It seems reasonable it will be closer to 20-30 million ton shortfall for this year/next year unless I'm missing something.

If you read two tweets down the thread, she explains that Ukraine is a winter wheat producer. Winter wheat is planted in the fall, and harvested in spring-summer.

It has already been planted.

> Ukraine plants their wheat in the spring

This aligns with every single combat photo I've seen thus far. I don't think I've seen one field of winter wheat. So the shortfall is not in winter wheat, but in the types planted right now.

> This aligns with every single combat photo I've seen thus far. I don't think I've seen one field of winter wheat.

1. How many photos from the war have you seen of farmland? It's not exactly the prime battleground.

2. We can assume that you can recognize winter wheat at this stage from photos not focused on the crop? It, of course, looks like someone's dead lawn when it first emerges from it's winter rest. Hard to differentiate from any other grassy area unless the photo has a lot of detail.

On that note, I started looking at some random pictures after I read your comment. I came across this one[1] of a field. Wheat or no in your opinion? In my opinion as a winter wheat grower: I have no idea. Maybe.

[1] https://asianatimes.com/wp-content/uploads/2022/02/XFXJX6VK3...

1. Hundreds. Twitter and Telegram are your best bet for field kills.

2. Does it? I've never seen a lawn planted in 7-8" rows.

Regardless of the species of plant in the photo, does that look like a tilled field to you?

> Does it? I've never seen a lawn planted in 7-8" rows.

I've never seen 7.5" rows be row-able at that stage unless you line yourself up just perfectly. Given that the photographers aren't focused on the crop itself, what are the chances? With sufficient resolution of the photo maybe you can still tell, but someone's random cell phone photo isn't going to give you that. Even a top of the line camera scaled down to web resolutions is going to lose that information.

> Regardless of the species of plant in the photo, does that look like a tilled field to you?

No, but why would you till it? Wheat is the easiest crop to no-till out there. Even the moldboard mafia no-till their wheat. You'd have to be dealing with some heavy compaction or other issues with the land to justify that fuel burn just to grow poverty grass.

The photo shows pasture land, not winter wheat. The wheat crop in Ukraine is almost 100% winter wheat that is planted in the fall. Source: https://www.fas.usda.gov/sites/default/files/2022-03/Ukraine...

While I tend to agree, especially since the photo appears to be of military training and not actual combat, here[1] is a photo of known winter wheat. This photo was taken a little bit later in the year, so the leaf is more pronounced and greener than you'd expect of the current crop, but even then is the casual observer looking for pictures of war going to notice? They really don't look all that different to me without stopping to really study the details and the first photo doesn't have much detail to work with. I would bet that this[2] is a field of wheat seeded into soybean stubble, but how can you really tell for sure?

[1] https://imgur.com/a/MII3Sc1

[2] https://pbs.twimg.com/media/FPMuO-OXwAsWAuU?format=jpg

I was going to ask you when it is typically harvested, but thought I'd check the page you helpfully linked:

Winter wheat accounts for about 97 percent of Ukraine’s total wheat production. It is planted from early September to mid-November and harvested between July and September.

So depending on what happens with the invasion, it seems possible that a substantial portion might still be harvested on schedule.

Why wouldn't Ukraine also plant a fall harvest crop? I thought Northern countries try to plant two crops per year. Countries like Argentina try to plant three.

I do not agree with the author's analysis - the impact on supply and demand are enormous, and the 1% number does not matter.

Effectively, the wheat buyer in Egypt (and other importers) needs to pay high enough prices such that: 1. Industrial wheat consumers in Europe/US and elsewhere substitute wheat with other products, making more wheat available for exports. 2. Previously untapped stocks get exported instead of stored.

Is there enough wheat worldwide? Yes. The question is what price Egypt needs to pay to secure its supplies, and if Egypt can afford to pay that price.

More details for the interested:

Ukraine exports around 20 million tons of wheat each year. https://www.indexmundi.com/agriculture/?country=ua&commodity.... We have to assume that Russian wheat will continue to be exported - there is no way that countries like Egypt will sanction Russian wheat. In the worst case scenario Ukraine will not ship any wheat for a year due to port closures and destroyed infrastructure, so the world loses 20 million tons of wheat exports.

There are two ways to solve the issue - by increasing supply or rationing demand. High prices help with both.

Supply solution: 1. Increase physical supply: It is not easy to source this amount of wheat elsewhere, especially not within a year. Most wheat in the northern hemisphere was planted last fall, meaning higher prices will not trigger a supply response for 1.5 years. Argentinean and Australian farmers can still increase their wheat plantings, but this will not be exported until November 2022 at the earliest. At the same time, the Ukrainian exports are missing right now. 2. Draw down global wheat stocks: Higher prices can make previously uneconomical exports profitable, pulling wheat from every available storage. The backwardated futures curve that helps with that - it makes storing wheat uneconomical. Stocks everywhere will draw down further, which means that wheat prices will remain elevated and susceptible to any further supply shocks (bad weather).

Demand destruction: High prices destroy demand for wheat. Human consumption is relatively inelastic, meaning higher prices have little impact on consumption (and catastrophic consequences). However, wheat is also fed to animals or used for ethanol production, where demand is more sensitive to prices.

Source: Working in wheat trading.

How do you argue that wheat demand is inelastic? Demand for food as a whole is inelastic, but wheat is just one of many, many food sources. Wheat is a cheap food. The second is stops becoming cheap people will shift to other cheap foods like rice or potatoes. I see a more modest increase in demand for alternatives that pulls all prices up, but it’s hard to see how prices skyrocket.

You are expecting everyone in a country that usually consumes ~5–10x more wheat than rice or potatoes to flip their whole food culture overnight? Do you have any historical examples of that happening? How did it work out?

Where are they going to ship the tens of millions of extra tons of rice/potatoes from that won’t be just as big a logistical change?

The best example is the Irish potato famine. Happening in the mid 1800s. You’d hope today’s more robust diets and supply chains would improve things

You are right in that there are countries where wheat as a food source can be substituted with other sources of calories in case of relative price differences. These are usually countries where wheat is not a traditional food staple, but where wheat products (cakes, cookies, bread) have started to replace local food supplies in a growing middle class. Unfortunately the big Middle Eastern importers of wheat have traditionally had a wheat heavy diet, and it is very hard to change dietary customs. And as another commenter said, it is not easy to replace 20mt of wheat with 20mt of rice or potatoes.

> What these places are facing is a SHIPPING shortage.

> Not a lack of enough wheat in the world.

That doesn't make it any better, most of the famines that took place before the industrial revolution happened because of transport shortages, sometimes a certain part of a kingdom would experience famine while another one, located at the opposite geographical end, would have been just fine.

Now, it depends how fast and if those transport/supply issues can be solved in a reasonable amount of time, I would imagine this is not as simple as firing up a new instance on AWS (let's say) if the instance you had on Azure had died out.

War ain't over. Next week I'm going to plant a few rows of potatoes as a supporting food.

Way ahead of you.

As I’ve previously commented on this topic on HN, the only reason this will start a food shortage is if people start prepping for a food shortage. If this news wasn’t as widely reported we’d be fine but the more we talk about it the more likely it’ll become a thing.

David Friedberg on All In Podcast went into this topic quite a bit. (His bona fides: ex Monsanto Exec, active founder/investor in food/ag space, previously founded climate.com).

Prediction was 200-300m people facing starvation due to the food shortages. Fertilizer input costs being the major driver, with decline in wheat exports also being an important factor.

https://podcasts.apple.com/us/podcast/e72-impact-of-sanction...

There are three types of lies. Lies, Damned Lies, and Statistics.

We've had enough food to feed the world for years and years. We have a supply chain and corruption problem.

Also in world undergoing deglobalization/realignment, we don't know if super wheat producers like China or India will be willing to export their supplies.

I think people are absolutely right to worry about commodities during this realignment to a multi-polar world. A lot of old assumptions about what countries will or won't do are not accurate any more. Just look at how the BRICS nations have ignored US sanctions on Russia.

Some thoughts:

1. Costs are at the margins. Is 1% irrelevant, or cannot be replaced? Replacement depends strongly on local weather and requires that land be substituted for wheat instead of other things.

2. Global production is 778 million, but Russia produces 74 million, Ukraine 28 million and landlocked (by Russia) Kazakstan 11.3 million, or a total of 113, or about 15% of total production [1] . This is the wheat Russia effectively controls. True, not all of that is exported, but I doubt Russia with 2% of the world's population eats 15% of the world's grain. I'd really like to see the source of her export figures (is dollar denominated exports? Total exports? Wheat of a certain type? Etc).

3. Food needs the following inputs:

- Ammonia

- Potash

- Phosphorous

- Diesel

- Propane (in the US to dry the grain in remote farms)

- man power.

All of those input costs are going through the roof, and Russia effectively controls more than half of those inputs:

- Ammonia: The Russians are a top exporter and they export the NH4 EU needs to make more

- Potash: Canada is the top exporter followed by... Belorussia and Russia

- Phosphorous: China, I believe is the top producer

- Diesel: Russia is a top exporter of diesel and also exports the heavy crude needed to make diesel. Diesel is used in everything, it's hard to sub out, has very inelastic demand, and short term supply is inelastic as well (fracked oil is diesel poor).

- Propane (used in the US to dry the grain in remote farms). This is byproduct of NH4 production (i.e. produced by Russia). Also, the price, like oil but unlike CH4, is basically global since it's readily liquified. Therefore, it's a (expensive) substitute good for NH4 which the EUros are scrambling to get. Conclusion - The US produces enough for itself, but Russia is the marginal producer and sets the global price.

- Man power, computer chips (those self driving tractors need chips!), etc. These need money, and the USD is not exactly going through it's finest moment.

Farming is considered a perfect competition, so margins are important. A sharp blow on any one of these would knee caps farmers, but they're facing all their inputs going up. Russia doesn't need to be the majority, or even the top player in any of these to bring large increases in the cost of food to whomever she wants.

[1] https://en.wikipedia.org/wiki/International_wheat_production...

So... A few points.

The first point is that future crops are at risk. It's not necessarily about current production.

The second point is that numbers and qualifiers like 25% of exports, 1% of crop can degenerate into empty superlatives. Ultimately, skilled analysis is required for useful conclusions. The numbers don't stand for themselves.

The third point is that markets can be very sensitive, and price changes can be big even if underlying changes in supply are small.

News is just a shock. Get scared and embrace for impact: people that do so will not question why prices rise and shelves are empty.

Much of the recent crude price increase happened before "the war" started. Still the war gets blamed.

https://oilprice.com/oil-price-charts/

I quickly googled what the annual wheat exports from Ukraine and Russia are and got a much bigger number than the tweet suggests.

You might want to (much less quickly) figure out what percentage of their exports is affected by their war, how the war & sanctions affect transportation & trade partners, and what the end result of that is.

Nobody has stopped exports completely. Nobody has stopped planting wheat.

How much of the capacity is affected by:

- manpower shortages due to war

- infrastructure destruction (roads, ports, etc)

- cropland destruction

- higher fuel prices

- higher fertilizer prices

- regional weather fluctuations

I see many towns in Ukraine are destroyed or emptied of people. I don't suppose farms in those towns will be producing anything this year.

These are all good questions, and I'm not denying Ukraine is suffering.

What I'm saying is that they likely still will export wheat. The amount is the question. I'm saying that the question is harder (a lot harder) than a quick Internet search on what percentage of world wheat production comes from Ukraine.

Sure but that would lead to a low confidence estimate given the war has just started, it's not clear whether the ports will be captured, it's not clear whether the sowing season will be disrupted, and it's not clear whether Russia will engage in protectionism of wheat. A shortage of more than 3% is possible. The tweet should have highlighted that uncertainty instead of presenting the 0.9% figure as a near fact. They smuggled in the word "estimate" somewhere but they obscured the uncertainty.

I googled as well. Ukraine exports were ~ 20 million tonnes. The tweet says the expected shortfall is ~ 7 million tonnes, probably because Ukraine is not expected to lose all of their production. If they did lose all 20 million, then the fraction would be 20 million / 778 million = 2.6%. Total production (including that consumed locally) is about 25 million, so if all of that were lost, the overall difference would be about 3.2%.

We need to also consider Russia's wheat exports. They've threatened protection measures on their wheat.

> FWIW: Anytime you see a shocking datapoint bouncing around in the news, it got there because one person actually looked at the data ONE TIME.

> But there's no guarantee OP actually knew what it means! And the folks repeating it definitely don't know. : /

I wish everyone took this to heart.

Reading this made me very happy. I was seriously scared and low thinking about 25% shortage of wheat. I hope this closer to reality than the 25% claim(short term considering fertiliser supply issue in the future?). This is the type of news I hope to read more often these days.

This thread makes some claims which seem contradictory, or at least unusual. [0] claims that a rise in the price of wheat futures caused more wheat to be planted; fair enough. However, [1] claims that there is no wheat shortage, there is instead a shipping shortage, and [1] and [2] both claim that investors are unreasonably panicked, because there is not actually a wheat shortage.

However, I really don't see the distinction between a "wheat shortage" and a "shipping shortage"; as the thread notes, in either case there are people without wheat. Areas with wheat shortages are going to have higher wheat prices, doesn't matter if there's plenty of wheat somewhere else!

In [0] markets are good because the higher futures prices correctly stimulated enough production (which is strange because, if true, it means the inflated futures prices were _incorrect_). However, the markets which were smart enough to stimulate additional production were not smart enough to stimulate additional shipping.

In [1] and [2] the higher prices (reacting to "a very real shipping problem") are nothing but panic, and even make it "harder [...] to get new import shipments launched")

How can inflated prices be both the poison and the antidote?

[0]: https://twitter.com/SarahTaber_bww/status/150777681533463347... [1]: https://twitter.com/SarahTaber_bww/status/150777682233906790... [2]: https://twitter.com/SarahTaber_bww/status/150777682448235316...

> I really don't see the distinction between a "wheat shortage" and a "shipping shortage"

The distinction matters a lot if you're trying to solve the problem. I saw lots of people suggesting a few weeks ago that the US change policy to cause more wheat to be produced, which would only help with the former.

Sure, of course, but that doesn't explain why price increases due to a "wheat shortage" are just while price increases due to a "shipping shortage" are panic.

While pointedly written, I’d like to see the rationale sustaining the wheat futures 30% rise.

Also, food shortages are largely man-made and ultra cost sensitive. The WHO was also sounding alarm bells… are all these people really one Twitter thread away from being wrong?

So?

- Even if it’s true now, a conflict zone is extremely high risk.

- Prices can move a lot when supply changes by 1% depending on market depth and bid/ask curvature.

I thought the primary issue was lose of oil-based fertilizers impacting the magnitude of the crop everywhere else in the world.

Famine is caused by _local_ supply shortages. The Dust Bowl in the US was a 30% wheat shortage, but it can happen from even less shortfall if transportation is a problem. The US weaponized wheat stem rust against Russia's wheat crops during the cold war, and they were hoping the weapon would reduce total yield by 15% in order to cause major damage.

Source on that?

Kirby and Carus (2020) “Agroterrorism Perspectives”, in Mauroni and Norton, eds., Agroterrorism: National Defense Assessment, Strategies, and Capabilities. U.S. Air Force Center for Strategic Deterrence Studies. Page 9: https://www.airuniversity.af.edu/Portals/10/CSDS/books/Agrot...

> During the Cold War, the United States devised Operation Steelyard, a plan to destroy 50 percent of the Soviet Union’s winter wheat using wheat stem rust (TX) mixed with feathers (known as the M1 carrier). If the president approved Steelyard, Boeing B-29 Superfortress bombers were to drop M115 500-pound “feather” bombs filled with TX in a 60-day campaign starting in March. The Air Force forward-deployed empty M115 bombs to RAF Lakenheath and Wheelus Strategic Air Command (SAC) airbases for this purpose. The M2 two-pound containers would be airlifted to the Air Force from the TX stockpile at Edgewood Arsenal, Md. TX required an annual revolving stockpile as it had a half-life of eight months. Rye stem rust (SX) was added to augment the inventory. Steelyard was the first operational biological war plan of the United States in 1952 with a stockpile of 0.8 tons TX and SX. Secretary of Defense Charles Wilson made Steelyard a standing capability in 1954 with an arsenal of eight tons of TX and SX.

Also see https://en.wikipedia.org/wiki/M115_bomb

This is a great reference! There is also an entry in the congressional record on declassification of the data. And 3 scientific papers. If you know more, send me a note. I worked in the area of rust spread and have always wanted to learn more about this.

I only know what I found in 10 minutes of web searches, sorry.

I didn't mean to drop that comment and leave. I learned about the weaponization from Ft. Dietrich people. The group that worked on this is long since retired. They published three papers around 1950, as three parts, that are about 1. the largest study of spread of rust fungus outdoors 2. storage of rusts and 3. response of rust to weather. All useful for stopping rust on a crop. And I see someone contributed references that are more direct than my scientific ones. I was working on prevention of rust spread.

What’s the tool to view this report in an acceptable format? I’m actually interested to read and share it.

I’m not sure about this site, but it seems to be rendering the research report in some strange form hyper-optimized for advertising?

This doesn't address how inelastic wheat demand is, and that value < 1% can still be a massive amount of wheat.

1% is a lot... why can't people deal with percentages of large numbers? Its COVID all over again. 1% of 7 billion is 70 million. Thats ten holocausts!

Supply and demand means I won't go hungry, but less valuable people absolutely will. Like the Ukranians during the holodomor...

(TL;DR of the following points: Global Supply != Global Availability)

This analysis misses the real issue by focusing merely on global supply rather than the entire system. I'm also not sure of the accuracy of some estimates, that could be fog-of-war, but while the USDA is estimating 7M ton shortfall in exports, Ukraine exports about 24M tons annually [1] and has banned all exports of wheat & other food staples. [2] They've already shipped some grain this year, but the longer this conflict continues, the worse the problem will get.

Maybe that doesn't yet change the overall global supply picture too much, but the author is not taking into account three very important aspects of this

1) Countries that have imported significant portions of their grains from Ukraine will be hit extremely hard by this. It's not much comfort to a country like Egypt that imports a significant amount of its food, a lot of that from Ukraine & Russia, to say "Oh but the global supply is barely reduced!". Contracts & import logistics of this magnitude don't turn on a dime, and there are undoubtedly logistical issues that make Egypt import from its current suppliers rather than another major exporter like the US.

2) During times of great uncertainly, global supply becomes somewhat disconnected from $cost. In terms of food availability, especially in poorer countries or to poorer people in somewhat wealthier countries, it's really not relevant that global supply is up or down a few points when the current price of wheat futures is up 40%. Absent significant intervention (such as subsidies) lots of people are going to go hungry.

3) It's worth noting global logistics separate from #1 above. In normal times pivoting quickly in this way would be difficult. Right now? Global logistics are still an absolute mess. It looks like bottlenecks are marginally better in places like SoCal, but there are shortages of a) ships b) shipping containers c) warehouse space d) trucking/drivers e) probably more. This will not only further complicate shifting to different suppliers, but also drive the end-point $cost higher than just the increase for the grain itself.

[1] https://farmpolicynews.illinois.edu/2022/02/a-closer-look-at...

[2] https://time.com/6156160/ukraine-bans-wheat-exports/

I don't know what it looks like elsewhere, but I found a Grain Transportation Report for the US that mentions that "In 2020, containers were used to transport 10 percent of total U.S. waterborne grain exports."

https://www.ams.usda.gov/sites/default/files/media/GTR031720...

I think wheat is usually bulk, not containers. I live in Portland, Oregon, that has one of the top US grain export ports and for a while there was no container traffic here. I recall the reporting mentioning that things like buckwheat and lentils shipped in containers and had to be sent to Washington and couldn't make use of the barges that brought stuff from Idaho into Portland but wheat used the bulk transport.

Whenever there are major disruptions like this, I wonder how much of the increase is just due to various people saying "we know people will be desperate, let's raise the price as much as we can" (or a system of indirection that accomplishes the same to make it seem less like that on an individual level).

It's winter...

I absolutely despise things like this.

The war in Ukraine, amplified by the West's anemic and at best useless sanctions, have likely led to a famine which will effect millions of people.

Yeah, us sitting here in our offices in the richest country in the world, arguably the people who helped cause this, won't be effected. Maybe our food prices go up a tiny bit.

The people in developing countries, like usual, will now become victims of starvation, which will lead to revolutions and civil war, and ultimately more suffering.

I'm sorry to be so cynical about this, but it has been like watching a slow motion, unending train wreck see the last year of foreign policy nightmares coming out of The United States. It turns out that, no, we are not in the end of history, and yes, there are still a lot of bad people in the world.

Our foreign policy laziness/ineptitude has led to a situation where the leader of a nuclear armed, hostile superpower (Russia) has two choices: win his war against the west, or die. In the process we have invalidated the idea of The Federal Reserve meaning anything (oh you have USD deposits? You made us mad? We'll just cancel them!), and are about to see countries selling oil denominated in something other than USD.

To be clear: Putin is a monster who has now killed thousands, and destroyed a country. I wish he was rotting in a prison cell. But the reality is: he isn't, and these absolutely idiotic sanctions we are imposing on Russia will lead to none of our stated foreign policy goals, and only suffering for the poor.

Somebody's twitter thread about how acksually this isn't a bad thing offers me no comfort in this regard.

If we use price as a proxy for wheat availability, let's not forget that wheat was trading for under $5 in 2019. It was up to $8 before the war began. Now, close to $10. Which means that the war has made wheat 25% harder to come by, so to speak, when compared to before the war, but the pandemic and all that's related to that had already made it 60% harder to come by. The war effects would have been less noticeable if we weren't already pushing the limits.

Gee and here I thought it was Putin who was dropping bombs. It's inconceivable he could just stop doing that? And go back to doing business peaceably?

It's not "Win or Die" for Russia. Anything but. It's one man's ego, and even Russians recognize that.

To assume only the US has any agency and only US actions make a difference, inevitably results in "The US is at fault for everything"

> It's not "Win or Die" for Russia.

Perhaps it's not "win or die" for Russia, but it is for Putin.

If you asked the average Russian on the street, they would probably agree that those are separate entities. If you asked Putin, I suspect you'd get a different answer.

> It's not "Win or Die" for Russia.

It took the US more that 8 years to retreat from Iraq, and you're asking a poor country to do such thing immediatly?

The genie is out of the bottle, I don't think the west will suddenly drop all sanctions, pretend nothing happened, and resume business even if such never-seen-in-history retreat happens.

The sooner they leave the less it costs.

That only reduces the cost from the point of view of Ukraine or the West, not from the point of view of the one being sanctioned.

What would your solution be?

This is a serious question. Yes, sanctions hurt ordinary people. Yes, there are second order effects that will hurt many people in the developing world. But equally, giving in to Putin will create a bigger problem for Ukraine now, and for eastern Europe and Taiwan in future.

There are no easy solutions here. Otherwise they would have been taken already.

The original ask from Russia was: Donbas becomes part of Russia, crimea becomes officially part of Russia, Ukraine promises not to join nato, and “denazification” of the Ukrainian government.

Ukraine is now offering that to Russia. My ask is that the adults who were screaming at the top of their lungs to take that deal a month ago, were listened to.

Further that the people screaming at the top of their lungs that turning a nuclear superpower into an isolationist state, and actively working to collapse their economy, is a suicidally stupid thing, also be listens to.

> Ukraine is now offering that to Russia

I've not been watching this as closely for the past week or two as I was previously, but I've not seen this. Particularly the "denazification" point seems unlikely to be agreed to by Ukraine.

Do you have a source for this claim?

https://www.reuters.com/world/europe/ukraine-sets-ceasefire-...

Of course the “denazification” thing is dropped. It was nonsense propaganda to begin with.

I’m curious where you are following this? This was absolutely huge news at the beginning of this week. It’s really weird to me that wherever you are closely following this didn’t cover it.

Your source does not support your claims.

Yes it does. Read the entire article. Or if you don’t actually care, don’t. But please don’t spread misinformation like this.

I don't get people like you - you are seriously contemplating what Putin's PR team announce on given day as some seriously meant opinion that's worth anything. When its exactly opposite, just empty words, full of lies, deceit and lack of anything meaningful. Spending any amount of energy on them is waste of time, next day will next round of demands.

You do realize that even if his demands would be met for some reason, there would be another and another round of demands till you have nothing and he has everything. Just random things I recall were mentioned by him/PR in last month - complete demilitarization of Ukraine (so you can defeat whole country with 2 tanks), demilitarization of whole Europe (hinting at his long-term ambitions).

Everybody in politics recognizes this and realizes that peace talks are sham, yet another set of lies. War will end exactly and only when he decides it, not a second earlier regardless of whats happening in Ukraine and rest of the world.

Do you think that Reuters is part of some conspiracy to print things from Putins PR team and pass them off as statements by Urkairne?

No conspiracy needed. Russia said something, Reuters reports, correctly, that they said it.

The mistake would be believing it because of that. Just such a mistake put Trump in office.

> I’m curious where you are following this? This was absolutely huge news at the beginning of this week. It’s really weird to me that wherever you are closely following this didn’t cover it.

It’s where I _was_ following it. Work has gotten in the way lately and I’ve had very little time for current events.

Please provide a source. The last I heard was that Ukraine would agree not to join NATO if it were voted on by Ukraininians after the Russians withdrew completely. Oh, and the other condition is that other countries like the US will guarantee Ukraine's safety, in a framework remarkably similar to Article 5 of the NATO agreement. I have never, ever heard Ukraine agree that Donbas and Crimea would be annexed by Russia.

It doesn't matter what Ukraine wants vis a vis NATO. NATO states have publicly admitted they were egging the Ukrainians along with NATO membership. NATO doesn't want to guarantee Ukraine's sovereignty. They couldn't care less about Ukraine.

NATO want to put missiles in Ukrainian and Georgian fields. Now that they've admitted that NATO's out of the question, why would Ukraine agree to make itself a target?

The problem with agreeing to the original ask of giving up more land is that it just continues to escalate. in 2014 already Russia took Ukraine and a chunk of Eastern Ukraine. If you give up more this year, what happens in 10 years? Russia will just ask again. Its the same all around the Russian borders. Putin is a thug who just demands more for himself. If you dont fight him now you'll be doing it next year.

Here is a great thread about this (read to the end): https://twitter.com/kamilkazani/status/1503053699798769666 also https://twitter.com/kamilkazani/status/1503768312236421120

Appeasing sycophantic maniacal warring leaders doesn't have a great track record, sorry.

Exactly! And in 2014, when they were invaded, not only did we refuse to honor our obligations as outlined in the Budapest agreement, but we refused to even start sending them weapons to defend themselves until 2017!

And then in 2021, the sanctions put in place to keep them in check WRT nordstream2 were lifted!

The appeasement is exactly why we’re in the situation that we’re in: completely incompetent (at best) foreign policy appointees fumbling us into a potential global conflict.

Neville Chamberlain agrees that forcing Ukraine to cede land to Russia will solve the problem once and for all - just like it did when we tacitly accepted the permanent Russian occupation of Crimea.

It really isn't a secret that Putin is pining for the days of the Soviet Union and wants to reunite the old power block - so why would we ever want to risk sacrificing the stability of the EU to restore the Warsaw Pact and all the international conflicts that came with it?

> The war in Ukraine, amplified by the West's anemic and at best useless sanctions, have likely led to a famine which will effect millions of people.

I'm the _last_ person to defend the actions of states, but I don't see an obvious way the "West" - meaning the US/NATO/Europe - could have responded in a way that avoided this once it began.

> I'm sorry to be so cynical about this, but it has been like watching a slow motion, unending train wreck see the last year of foreign policy nightmares coming out of The United States.

Sigh. After regretfully defending the actions of states, I now find myself in the same position with regard to Trump. Trump's foreign policy - as odious as many people found it at the time - seems to have been quite effective at promoting international stability. I'll point out that it was in place for less than four years, so it's a fair criticism to say that this may have been at most a short-term condition, but... we didn't face the real possibility of global thermonuclear war during that time.

> Our foreign policy laziness/ineptitude has led to a situation where the leader of a nuclear armed, hostile superpower (Russia) has two choices: win his war against the west, or die.

I'll take issue here. Russia's actions - specifically, Putin's actions - have lead to this choice. Putin committed Russia to a war that was obviously going to be uniformly denounced by the international community. The invasion of Ukraine was poorly planned, poorly supplied, and had no reasonable victory condition. It was predicated upon the rapid collapse of the Ukrainian state. There was no fallback plan for how to handle things if it didn't crumble in a matter of hours or days.

I can consider the argument that our foreign policy set up the preconditions to allow Putin to be so completely reliant upon his own biased perspective, but I really don't think that holds water. If his perception of the Ukrainian state and people were so far removed from reality, who is to say that his perceptions of our foreign policy wouldn't be similarly warped?

> these absolutely idiotic sanctions we are imposing on Russia will lead to none of our stated foreign policy goals, and only suffering for the poor.

I disagree here.

The sanctions will lead to moving toward our FP goals and suffering of the poor.

We don't like to be so blunt about it, but the fact is that the very intent of sanctions are to cause people who are otherwise uninvolved to suffer. The idea is that those uninvolved people will then be incentivized to _become_ involved, disrupting the political and economic support of the target.

In other words... the purpose of these sanctions is to cause suffering among the Russian people, which in turn will make it more difficult for the Russian state to pursue military action. Given time, sanctions can even ignite revolution.

Finally: you're 100% correct to say that Putin has no good options at this point. "Win or die". Sanctions, long term, will ratchet that pressure up further and further until he is forced to make a choice. Forcing Putin to decide between losing and taking everything else down with him may not be in the best interests of the world...

> these absolutely idiotic sanctions we are imposing on Russia will lead to none of our stated foreign policy goals, and only suffering for the poor.

I agree. Sanctions won't work till everyone applies it. Currently only the Anglosphere, Europe, Japan and SK are parties. That's far from the whole world.

Countries like India, African countries etc who aren't as privileged as the West may not be interested in sanctions when they have billions to feed.

And applying secondary sanctions on poor people is cruel and would eventually lead to distrust in USD and the western order which is already at its weakest. For eg, can you apply sanctions on crisis-hit Srilanka when the country is broke to the point of starvation?

This is NOT good for US hegemony. It will lead to a multi-polar world. If China/India can offer an alternative without the sanctions minefield, the poor countries would take it.

> Putin is a monster who has now killed (directly and indirectly) millions, and destroyed countries

Corrected that for ya.

I don't offer quick safe easy solutions to above issues. I don't think they exist. Don't vote for Trump-like populists effectively trying to sell rest of western world to Russia just because they are republicans just as you? Don't leave weak states at mercy of all-grabbing merciless powerful industries?

That's an empty phrase and wish too, there are reasons why Trump got voted in and almost won second time, he just said things too many people wanted to hear. I would say reasons of very polarized US society, you are either with us or against. As we can see ie in UK its not unique to vote populists in place even in countries with strong democracy.

I don't see what can be done more effectively in this multi-polar world to a bad state owning tons of nukes. Even if only 1% would be functional its still too many.

Or you want to ignore whats happening just to keep business going and prices steady? I don't think anybody in US government really cares about Ukraine or its people, but they are logically helping damage their adversary and Russia is working hard to give them moral/PR upper hand. But make no mistake, this war is about future of Europe, not just Ukraine. If Europe is split into pre-1989 order, US and its power projection will be severely weakened.

Have a hit squad taking down just Putin? Good luck there, I think as KGB agent he should have this covered. I think 1 billion USD and US citizenship & evac with family to anybody in his inner circle who would take him down would have higher chance. But maybe 10 years down the road it would be viewed as a very bad decision. You want to reform Russian society? I'd call that an impossible task for an external entity.

So, what's the solution to this situation?

> So, what's the solution to this situation?

I wrote this many times, the lowest blood price for subduing Russia is a NATO-wide airborne operation to behead Russian government, and a mother of all airlifts.

You fight a mafia state the way you fight a mafia, by simultaneously dismembering, and beheading it.

To completely subdue Russia, NATO has an option to do first strike nuclear attack with half of its combined arsenal along the lines I wrote above.

Russia is a hypercentralised state beyond imagination. Russia will cease its existence as a state if Moscow region is taken out, and the most limited counterforce attrition is ensured.

Putin et al are not in Moscow but dug somewhere deep probably in Ural mountains. This alone tells you how Putin thinks and how safe he feels. Now I don't think that Russians ever did dig deep enough to avoid evaporation from few megaton warheads hitting such place in quick succession, but not sure if Washington knows the exact location.

Anyway such attack would prompt similar ICBM response, they are generally quite incompetent as we can see in Ukraine, but not that incompetent to not have this working.

And nobody in west is going to justify killing few million civilians in Moscow, our society is well beyond that point.

> Yeah, us sitting here in our offices in the richest country in the world, arguably the people who helped cause this, won't be effected. Maybe our food prices go up a tiny bit.

> The people in developing countries, like usual, will now become victims of starvation, which will lead to revolutions and civil war, and ultimately more suffering.

> Somebody's twitter thread about how acksually this isn't a bad thing offers me

The Twitter thread very explicitly states that this is an extremely bad bad thing that will cause famine in specific developing countries and that the actual resulting issue we need to address to prevent it is logistics. From the thread:

> What these places are facing is a SHIPPING shortage.

> Not a lack of enough wheat in the world.

> Their food supply chain problems are still dangerous. A local, shipping-induced shortage that lasts a week can still kill you.

> To solve that problem, we gotta start with being clear on what the problem IS!

> We haven't! We decided it's a wheat shortage, not a shipping shortage.

> ...

> And that's how a 0.9% shortfall in global wheat production, that farmers already fixed 4 months ago, turned into a global commodity panic that solved nothing

> while a very real shipping problem continues to threaten people's lives.

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