Beyond Mathmetical Odds - An ode to grains

The continuous fertilizer shortage

This is the second part of this piece.

Beyond Mathematical Odds - Continuous energy crunch

What prompted me to write this one right between moving and other things in life right now was the following, a long-term trend that has been picking up pace exactly at the worst possible time.

Source

This has been in the works in the Netherlands for quite a while and while slow, the implementation (more like encroachment of elitist agenda) goes on with little opposition. This is a two-fold problem. The first is the expected, the Netherlands is a farming powerhouse and one of the largest exporters on the entire planet, so a cut this massive will inevitably have dire consequences for food scarcity and inflation (basically cementing the actual fact both of these will play out), the second problem is the human side. Farmers are being driven out of business and committing suicide (thanks to a friend from the Netherlands for this heads-up).

“30,000 companies are affected by this. People can’t sleep anymore. There are suicides among farmers who can’t anymore,” - Source

The Canadian government is also aiming to achieve similar “goals”, by cutting the emissions of certain chemicals, effectively crippling farming as a byproduct, because a shorter supply of fuel and materials leads to higher costs.

Earlier in this series of posts, one of the dynamics I often mentioned was, and still is the massive weather shift we would experience throughout the whole year, and how this would affect the production of food staples. A massive problem because of all the shortages that the entires industry necessary for food production went through, with the hardest hitting ones being the skyrocketing prices of diesel/fuel in general and the fertilizer shortage, which made many farmers being public in stating “I hope Mother Nature help us, if not…”. Well, Mother Nature didn’t want to help.

Australia has been devastated by floods in certain regions, creating a state of waterlogging and deeply impacting wheat quality, lower quality=lower yield=less product=higher global prices. The opposite is also affecting farming in other countries, where dry weather will impact yield and quality. I have covered California draughts before, a very important farming state in the US, and the losses are now up to 2 billion dollars. Argentina (a big wheat producer) had its wheat production numbers slashed multiple times because of the excessively dry wheater, and it is still atypically dry, deeply impacting both its national inflation numbers, and international prices.

Italy’s dry weather in its rice-growing region was so severe it will affect production, similar to many other regions and other grains, I don’t need to repeat myself in every paragraph. Spain finds itself in a similar position with some experts expecting them to plant less rice because this is a water-intensive crop.

“This year’s severe drought conditions caused crops like wheat and corn to wither away and pasture cattle graze to dry up. Ranchers across the state are now looking for ways to feed their cattle through the winter as hay supplies dwindle.” a news article from Oklahoma talks about the impact of hay shortages, caused by drought.

Leading us back to a geopolitical move that was adopted often early this year, and I have written that it will pick up pace as things break down. Resource nationalism, banning the export of specific raw materials/foodstuff to control your internal prices/inflation, deeply impacting global prices. Ukraine did with grains in February and March, India with wheat in May, Indonesia with palm oil in April, and Argentina with corn and wheat, and this list goes on with shorter time bans from other countries.

And India recently banned the export of wheat flour.

In light of supply chain disruptions due to the Russia-Ukraine war, India had restricted the export of four variants of durum wheat to ensure its food security.

After restricting wheat exports in May, the Indian government had also banned wheat flour exports in August to control inflation.

Overall wheat production this year will end up being tight, while Ukraine’s wheat production was significantly less in the 2022/2023 season, the other biggest producers picked up the “pace”, such as Russia with a really strong harvest (with some of the sanctions expected to hinder the export of the grain, but not the production), Canada also has a strong season. The problem starts with the US having a tighter season, Europe's dry weather diminishing the yields in the entire European Union, and Argentina too. If nothing goes wrong from here until mid-2023, prices will still remain higher than they are now… this is where the biggest problem resides.

I sometimes quote an old phrase I cite often, experts are often 3 months behind, and this is the biggest variable in this complex equation. Fertilizer production and affordability. If you read the substack I mentioned at the start of this one, you are aware of how severe the energy and gas shortage and prices are right now, and while I decided (and didn’t have the time) to send out an update, many European countries decided to stick to their suicidal policies and decisions to not tackle this energy issue.

With half of its fertilizer production offline, probable loss of who knows how much more percentage, and incredibly high prices for gas for at least the foreseeable future, one can easily deduce that this situation will not be improving in the short term.

We could see fertilizer shortages next year

As central banks around the world hike interest rates in response to inflation, one ag economist says all signs point to a global recession, and that could affect fertilizer inventory here in the U.S.

Researchers at AgriFood Economic Systems, based in Canada, say North Americans are the lucky ones when it comes to fertilizer supplies. Dr. Al Mussell is the lead researcher at AgriFood and says as Europe deals with its energy crisis, western Europe is already expecting a smaller food crop harvest next year due to severe input shortages.

“The front line on this, really, is western Europe. It’s Germany, it’s France, those western European countries. They are in a bad way, and I don’t know if, as North Americans, we sense just exactly what they are going to have to contend with. Before the Nordstream gas lines were blown, they had an energy crisis on their hands. You’re going to have short crops next year because the fertilizer just isn’t there,” said Dr. Mussell.

Prior to the Russia-Ukraine situation, the world has not been able to build a solid grain stocks inventory for five years. While inventories did show a slight increase last year, Mussell says those numbers are misleading. Along with the energy crisis, western Europe has a looming food shortage which is based on a lack of nitrogen-based fertilizers.

“There’s not enough nitrogen fertilizer to go around, there just isn’t. We haven’t been able to build stocks since 2017. Year by year, basically we’re feeding ourselves out of the previous year’s harvest. Last year, the stocks were up. Well, the reason for that is when you’ve got 21 million tons of corn and wheat stuck in Ukraine, that obviously affects that relationship. To a much greater extent over time, those stocks are being held in importing countries. If they’re sitting with an importing country, they’re not moving,” Dr. Mussell said.

In a world where demand will outpace supply and shortages are commonplace, forward planning is a necessity. Dr. Mussell says producers should have as much input inventory in place as possible, and now is the time to have a friendly banker on your side.

With all the data we covered here, anyone reading me for more than 6 months will be aware this is the exact scenario I outlined very early on this year, outlining the responses of countries and what they would entail, and the byproduct of their misguided choices is here, taking into consideration all the drastic weather shifts around the globe, impacting food producing countries at different levels, often with dire global pricing consequences, and with a persistent fertilizer shortage in our hands, that not only didn’t go anywhere, it will get exponentially worse, since the data analysis of most is retroactive, especially think-tank/government oriented analysis, one could venture to forecast that food prices will remain high for at least 2023, perhaps mid-2024 without the further breakdown of global order and industry.

Chief Economist and Director of Research, Assessment, and Monitoring at the United Nations World Food Programme (one of the very few raising the alarm to this exact scenario) had a recent interview and I advise you to watch this 1-minute excerpt of the interview. He predicts a shortfall of 66 million tons of food staples because of the scenario discussed above, and by his own assertion, enough food to feed a little over 3 billion people for an entire month.

The impact this will have on food prices, civil unrest, and overall geopolitical movements can’t be stated enough. And the problems with droughts are two-fold, and while I am one of the biggest “haters” of the WEF, if you ignore their propaganda spin inside this article, it is a very good starting point to understand the impact these droughts had not only on food production but also in logistics and the supply chain. If you can ignore the propaganda spin and linguistic manipulation, or filter through it, I recommend reading the entire article.

• Water is vital to global trade, with 90% of products moving around the world via oceans and waterways.

• But Summer 2022 saw severe droughts that led to several international trade routes becoming unpassable.

• Economic damage from droughts jumped by 63% in 2021 compared with the 20-year average, according to the World Meteorological Organization.

Water is vital to global trade with 90% of products moving around the world via oceans and waterways.

But summer 2022 illustrated just how sensitive some key waterways are to droughts – the Mississippi, Yangtze and Rhine rivers all experienced serious bottlenecks.

The Rhine River starts in Switzerland and runs for nearly 800 miles to the Netherlands where it joins the North Sea. It is a crucial transport link for Europe, moving over 300 million tonnes of goods a year.

The southwest US is in the midst of a 22-year drought – its driest period for 1,200 years. And even less arid parts of the US to the east are feeling the effects of drought more often.

The Mississippi River runs from Lake Itasca in northern Minnesota for nearly 2,350 miles to the Gulf of Mexico, transporting over 450 million tonnes of imports, exports and domestic freight every year.

I will write more about these subjects and the many other networked effects, but with both substack, one focused on energy, the other focused on grains, plus my readers are probably very aware of the massive economical recessive trends building up (because, once again, of government stupidity), you could venture an easy forecasting/guesstimation and reach the conclusion that 2023 is shaping up to suck. And this is ignoring all the virus/disease angles.


I want to take the patience of my subscribers, and still ask for more, normal writing shall resume soon, I am still up to my neck with “life stuff”. And while I refuse to “shill” my own substack posts (repeated mentioning or posting them on social media) I do recommend you to read older posts, because I have written extensively, about a lot of things, but of special attention, SARS-CoV-2 related writings.

I might write something shorter, something I am not a fan of, or might not, in any case, I wish all my readers a pleasant rest of the week.

PS: Per what I just wrote above, I am taking much longer to reply to e-mails and commentaries, DMs, and tweets, so… be patient.

I welcome and appreciate the support of those who choose a paid subscription, or who decide to buy me a coffee whenever they feel like it, and everyone who shares my Substack. Without all of you, this wouldn’t be possible.