Good evening, yesterday I had to deal with bureaucracy so no posts, I am also inclined to send fewer e-mails per week sometimes when I think there is a need for better absorption of the information.
This post will be a part opinion and part analysis. It is also directly linked to both of the pieces below, for a broader perspective.
For starters let us look into what is going on with China and its colossal appetite for grains and its long (lost?) dream of food security. Per the Grain piece above, for weeks China has experienced massive rains, rains that are now becoming the typical floods social media users are accustomed to witnessing. Affecting its wheat harvest and quality.
And now China has its worst winter wheat crop in history.
Minister of Agriculture and Rural Affairs Tang Renjian told reporters at the country’s annual parliament meeting that a survey taken of the crop prior to the start of winter showed a 20% reduction in first- and second-grade winter wheat, due mainly to heavy rainfall during planting that reduced acreage by one-third.
Among all the other dynamics going on in the world right now in regards to grains, food security, and everything else, this is already affecting the internal markets and prices in China. Noodles, a staple in Asian cuisine is rising in price, and the inflationary trend ain’t going away anytime soon. This is important by the simple fact that whatever China doesn’t get internally, it will buy from elsewhere. Per the graphic below.
This alone has the power to push inflation upwards in seismic ways that markets can’t accommodate, leading to pricier food staples elsewhere, like Brazil experienced in 2020 and going forward.
For months China has been buying record amounts of grains from anywhere else, but the US has been one of the record sellers. Most experts are expecting China to buy Brazilian corn soon. Would not be a problem if the US was not experiencing difficulties with fertilizer use, and its planting season is slightly later in some states.
Minnesota Farmers Are Far Behind Schedule This Planting Season
Minnesota farmers have been unable to plant nearly any wheat and have only planted a small amount of corn so far this year.
Northern Minnesota is a hub of sugar beet production. By mid-May last year, 100% of the crop had been planted. This year, only 8% has been planted.
Farmers cite bad weather for the delays. Severe thunderstorms have recently swept across the Midwest, bringing with them flooding that makes planting impossible.
“The comparison of this year to last year looks drastic,” he recently told MPR, but “to put that in a little context though, we have had other similar years.” He highlights how in “years like 2011, 2013 and 2014, 2018 and 2019” farmers “had very similar planting progress” to this year.
“This does feel late and a difficult spring for farmers,” he concluded, “although we’ve tackled years like this in the past.”
As I wrote in one of my few opinion pieces, farmers globally were hoping for Mother Nature to be helpful, so all the other problems brought by the pandemic, high energy costs, and the war in Ukraine didn’t severely affect their efforts, and I wrote afterward, betting on the whims of Nature didn’t look like a wise strategy.
As expected, the entire planet is experiencing erratic weather, with too much rain or drought both in the wrong places, affecting harvest, yield, or planting. China's appetite for grains and its goal for food security, allied with these dynamics will keep pushing inflationary trends upwards with no end in sight, which can lead to scarcity.
Some countries looking into not only profiting from the current dynamics and deeply concerned about food security and social stability are looking into bolstering their farming area. The Indonesian president is one of them.
President Joko Widodo urged Indonesians to make use of idle land to plant rice, corn and other staples to build up the nation’s food supplies amid the global shortage fueled by the war in Ukraine.
“Brothers and sisters who can plant rice, please plant rice. What else do you want to plant? Corn? Go ahead. Right now the price of corn is going up,” he said on Wednesday at a gathering of farmers in Central Java.
And so is Bolsonaro, using different means. Giving the land ownership rights to farmers and others, and credit access so they plant corn, and soy. To fight inflation and the need to import food, countries are constantly resorting to cutting taxes, like India cut taxes on Palm oil (India is the world's biggest edible oil importer), Russia on chicken a few months ago, and Turkey too.
Since we are talking about food, it serves as a segway for a few things I want to comment on. In a post weeks ago I shared a screen capture from a UN document about the Ukraine war, everything we discussed in this series, and the food inflation outlook for the decade.
As a curious note, depending on the quality of the soil your country has, farmers will outright refuse to buy fertilizers until the prices drop further because they can’t pass the costs to the customer, as Brazilian farmers are doing right now.
Families will skip meals to deal with the cost-of-living crisis, UN special advocate says
“An increase of food prices of the magnitude that we’re seeing, of energy prices, basically will mean that a lot of families are going to have from three or two meals a day to have one meal a day,” Queen Maxima of the Netherlands told CNBC.
The war between Russia and Ukraine — both major producers of food commodities and energy — has disrupted global production, trade and supply in these areas, leading to a surge in prices.
According to the World Bank’s latest Commodity Markets Outlook report, energy prices in 2022 are expected to rise by over 50%, while wheat prices forecast to soar by more than 40%.
It is now all over the mainstream media, the outlook of food prices and inflation, and there is no hiding it anymore.
According to the World Bank’s latest Commodity Markets Outlook report, energy prices in 2022 are expected to rise by over 50%, while wheat prices forecast to soar by more than 40%.
“An increase of food prices of the magnitude that we’re seeing, of energy prices, basically will mean that a lot of families are going to have from three or two meals a day to have one meal a day. And this in turn, will actually give, probably, will be the source of even more instability in other regions.
As I wrote very early on this Substack as a forecast, and it will somewhat come to pass, if this is malice or incompetence I let you decide, each person has its own perspective, and in truth, I don’t think there are “wrong” perspectives unless you go to the extremes (Nothing bad will happen vs the world is ending).
And since I mentioned fertilizer, a problem we have been keeping an eye on around here (I already gave people a way out of not having fertilizer and maintaining yield).
CF Industries, one of UK’s biggest fertilizer producer decided to close one of its plants for good.
The move to close the factory highlights the challenge that expensive gas poses to European industries. The threat to fertilizer output has also been bad news for the food and drink sector, because the factories produce carbon dioxide as a byproduct. That gas is used to stun pigs and chickens for slaughter, extend the shelf life of fresh food and give beer and soda their fizz.
Fertilizer output at CF’s Billingham and Ince sites has provided as much as 60% of Britain’s CO2 production. The UK government has called the gas an “essential component of the national economy.”
The company complains about the competitiveness against imported fertilizers and unsustainable margins given the energy costs in Europe, this is a long-term trend, starting in 2021 and getting worse as governmental decisions before and after the pandemic fueled such outcomes.
And since I mentioned govern stupidity…
Top producer Albemarle risks shutting German plant if EU declares lithium a hazard
Top lithium producer Albemarle Corp (ALB.N) may have to shut its Langelsheim plant in Germany if the metal used in electric vehicle batteries is declared a hazardous material by the European Union, its finance chief told Reuters.
Lithium's pivotal role in electric vehicles makes it an important commodity in meeting global targets to cut carbon emissions, and it was added to the EU's list of critical raw materials in 2020.
I have made the argument many times that a sect within the European Union elite is hellbent on collapsing the entire continent either for unknown reasons to us or to virtue signal. When it comes to the German government it might as well be various reasons + virtue signaling.
Parts of the Western elite and big investment firms want to push for a Green Future whatever it takes, including collapsing parts of the global economy, and per a comment, I made on my Twitter a few days ago, for the last 2 years, the elites stole enough money to hedge such costs. If anyone, government, or elites were serious about anything to do with a renewable path, even though renewables are a lie at the current level of technology, they wouldn’t oppose anything to do with the raw materials you need to support these goals. Any legislation adding to the cost of producing these materials will just end up giving leverage to China.
And China is now opening itself up, it is creating per Bloomberg “Perfect storm for Inflation”. On the energy side of things (the most important one in my opinion), there are many things the reader should be aware of.
America’s Summer of Rolling Blackouts
Green energy policies are making the nation’s electric-power grid increasingly unstable.
Summer is around the corner, and we suggest you prepare by buying an emergency generator, if you can find one in stock. Last week the North American Electric Reliability Corporation (NERC) warned that two-thirds of the U.S. could experience blackouts this summer. Welcome to the “green energy transition.”
We’ve been warning for years that climate policies would make the grid more vulnerable to vacillations in supply and demand. And here we are. Some of the mainstream press are belatedly catching on that blackouts are coming, but they still don’t grasp the real problem: The forced transition to green energy is distorting energy markets and destabilizing the grid.
As I said a few times, and I will repeat myself often, the problem with forecasting is, that you end up sounding that you are just writing the same things, but that is how forecasting works. Adding new variables to the non-linear dynamics you will often find you are repeating yourself.
This Wall Street Journal opinion piece is in line with my own analyses, my opinions, and of course reality itself, even though some Americans refuse to see and accept that yes, even in the US things can go wrong, and inconvenient times might come sooner, rather than later. The closing of old plants is not helping anybody too.
This Time piece on Diesel Shortage (that I forecast and everyone else paying attention did too) is quite good to get a grasp on what is going on. It explains the refining side of things, and how the non-expansion of refining capacity partially leads to where the US finds itself today, other dynamics apply too. The problem with diesel shortage is simple and easy to analyze.
Everything is transported using diesel. Farming uses diesel. Ships use (a form) of diesel. Generators use diesel. Infrastructure is reliant on diesel, the higher the price tag on every gallon of diesel, the higher the costs of everything else. Diesel can fuel inflation at a faster rate than actual supply (or lack thereof). Of course, so I don’t sound so much one-sided as I sometimes know I do.
Europe: Fuel rationing may be coming to Europe IEA
The current energy crisis could be one of the worst and longest in history and Europe could be hit particularly hard, the head of the International Energy Agency, Fatih Birol, said on Tuesday.
In an interview with German magazine Der Spiegel, Birol said that the fallout from the events in Ukraine is likely to make the current energy crisis worse than the crises of the 1970s.
“Back then it was all about oil. Now we have an oil crisis, a gas crisis and an electricity crisis at the same time,” Birol told the publication, adding that before the ongoing events in Ukraine, Russia was “a cornerstone of the global energy system: the world’s largest oil exporter, the world’s largest gas exporter, a leading supplier of coal.”
Again one of the forecasts slowly becoming a reality. By what we covered so far in this Substack it should come as no surprise if you did cursory research back in January or February. The world came to heavily rely on cheap Chinese everything, and cheap Russian commodities and specialized materials (such as gas for semiconductor production), and a disruption in the flow of any of these would have global consequences.
Months ago when you merely mentioned fuel rationing, most would call you crazy or not knowing what you were talking about, alas the ones that pay the cost of expertise shortsightedness are the poor and the middle class, not the ones lacking any foresight.
“If we have a harsh winter and a long winter and if we do not take [demand-side measures] ... I wouldn’t exclude the rationing of natural gas in Europe, starting from the large industry facilities,” he said.
One of the reasons I decided to cover the Energy side of the cascade was because of how impactful energy dynamics are in complex systems, and obviously the importance of such in our current globalized world.
The most concerning part of what he says is the bold part. We are still feeling the effects of high energy costs on everything needed and used in an industrialized society. Every single shortage of significance can be tied down to energy. China curtailing magnesium, and steel production. Europe smelters closing down, or lowering production drastically because of the energy woes last year, the list is huge. Any type of rationing hitting primarily industry at this point will have massive repercussions short and long term.
Some countries like France have tried for months to curtail the outcomes of attempting to go green at the worst possible time, but to not much avail since some of its most important plants are hit with months-long maintenance, and turning some of these on again is not a matter of simply pressing the red button. And as I wrote a few times, when countries get desperate enough to curtail the costs and resources at home, they will resort to all sorts of tactics to secure their own stability. Algeria has just begun a spat with Spain suspending a previous treaty, and this might affect the Gas supply in Spain.
At this point, it is pretty clear what has been going on, and what might happen in the near future. I am aware it looks bleak, and indeed we are in for some amount of harder, perhaps frugal times, but you should attempt to prepare yourself.
You still have some time to buy some backup power, if you can’t afford a backup generator (they will be running out shortly), or solar panels (these will be sold off soon too), you can buy external batteries, and portable solar panels to keep smaller devices going. Amenities, when you have no energy, are very important, and keep in contact with others and informed about what is going on too. Blackouts are already happening regionally in some countries. With China opening up, things will get out of sync again, even if the inflationary trends elsewhere and fewer imports, its fuel consumption (and everything else it consumes) is colossal enough to move all markets elsewhere.
I often end these longer pieces with the usual “You can buy me a coffee” and ask anyone reading to become a free or paid subscriber. But for at least 10 days I won’t, perhaps only in my Amyloid (SARS-CoV-2) piece, otherwise I won’t.
Becoming a Subscriber (free) helps me, buying me a coffee and becoming a paying one (supporting me) obviously helps me. But I rather you go and buy what you need. Especially AND MAINLY non-perishables.
The goal behind you buying and stocking some food is simple. It is a hedge against tail risk [unforseen events that have a disproportional impact on the whole system], not surviving the collapse of industrialized society, which I don’t think will happen. Having a few weeks worth of food, at the very least, is a way to beat inflation since given all these pieces so far, ain’t getting better anytime soon. The real objective is to buy you a few weeks of time so we can analyze what is going on and how to better deal with whatever situation arises.
You don’t need to buy weeks worth of food at once, grab a pen and paper, and budget it out. Add a little more every other day, or every other week. I can (and recently did) live on bread and eggs so wheat flour is my main option, others like rice and bean. You choose whatever is easier for you. I would highly advise stocking flour of the simple fact you can use it on so many dishes and it is versatile.
Since markets and prices are very location-based see what you can afford and it is available to you, a friend and subscriber recently told me the powdered eggs went up hundreds of dollars in price where that person lives.
Everything else comes second, including energy. Water>Food>Shelter>Energy in degree of importance.
And as usual, I really appreciate all the supporters here and those who buy me a coffee. You are all fantastic. Appreciate all the subscribers too !!!
As a final note, and so I don’t send another super short e-mail tomorrow morning. This is a very concerning piece of news.
TEAMSTERS WARN POTENTIAL WORK STOPPAGES COULD HAVE MAJOR IMPACT ON EAST COAST FOOD SERVICE INDUSTRY
The Teamsters Warehouse Division and numerous Teamster locals currently in contract negotiations with US Foods (NYSE: USFD) are putting the foodservice giant on notice that work stoppages are imminent. Workers at a growing number of US Foods Distribution Centers throughout the East Coast are considering the possibility of walking off the job following an increasing number of unresolved labor contracts.
Workers at several of these locations say the company has violated federal labor laws, and US Foods is currently being investigated by the National Labor Relations Board (NLRB) for several allegations of unfair labor practices (ULPs). The allegations include illegal terminations, unilaterally changing working conditions and bargaining in bad faith with union representatives.
I have warned many times and stated that for a multitude of reasons strikes would happen and come at the worst possible times. This one comes at the worst possible time, because a similar strike might happen with port worker, for a similar reason and the American government was aware of it.
Government and expert shortsightedness will make our lives 10x harder than it actually should be…
I have checked multiple times, maybe it is the length of the post or a bug (common lately with Substack email delivery) but the e-mail formating is all wrong in some parts. I am aware of it but nothing I can do about that. It is normal here in the site, so I guess there is that.
We are ruled by the insane.