Email on the day on world hunger
Comment of the Day

March 21 2022

Commentary by Eoin Treacy

Email on the day on world hunger

*Almost certainly widespread famine within a year*: _15% of world’s calories come from wheat. 1/3 of all wheat comes from Russia and Ukraine…_

Russia has banned export of wheat; a lot of wheat supply blocked. Whole planet earth operates on a 90-day food supply. Once we stop making food the world runs out in 90 days. Most vulnerable nations lose the supply first; very quickly a massive bifurcation. Already have 1bn living on under 1200 calories…

The even bigger problem is the future planting season. Wheat spring planting season is right now; not a lot of planting going on…

This is because of the fertilizer problem. All fertilizer is made up of nitrogen, phosphorus, or potassium. All farmers must use this. Without fertilizer crop does not grow. Nitrogen is made from natural gas. Nat Gas prices have doubled. The price of nitrogen-based fertilizer has gone from 200 per ton to 1000 per ton. 10% of world phosphate and 25% pf potash is from Russia and that has been banned for export. Prices on phosphate and potash have sky-rocketed too. Now it is so expensive to grow crop that farmers are pulling out of production.

The world is “scrambling” for food right now, corn, soybeans etc. skyrocketing. Strategic reserves of food being released now…

A bad weather year can be disastrous. Regardless, it will be a humanitarian disaster within 12 months and we will see hundreds of millions will go starving (think famine)

We just don’t have enough food. The way supply chains are set up just don’t work.

Eoin Treacy's view

Wheat prices accelerated to test the 2008 peak near 1200¢ and paused over the last week. War in Ukraine and the slow start, or potential absence, of a planting season are obviously major considerations for its customers. Russia’s efforts to capture the entire Black Sea coast are an additional obvious headwind to exports.

Nothing has happened to stop Russian farmers from planting. For them finding customers will be the primary concern. Belarus is a major supplier of potash and Russia is not short of natural gas. That suggests Russian wheat production is going to be extremely cost effective this year.

Russia is about to build a significant food buffer and is probably aiming to use wheat as a trade weapon for the emerging world. Food is at least as powerful as natural gas in being a geopolitical lever or sanction buster.

Corn is by the far the most nitrogen intensive crop (40%), while wheat accounts for about 10%. Mosaic wobbled for a couple of weeks and breakout again today.

Nutrien had a shallower reaction and broke out today as well.

Yara International has been ranging in the region of the 2008 peak for the last year. The share us rebounding from the region of the 1000-day MA and appears likely to play catchup with the wider fertiliser sector.

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