The Global Agriculture Impact From The War In The Ukraine And Other Current Events

Our food supply is in the headlines every day – as prices soar, shortages increase and a war 6,000 miles away has the head of the U.N. Food Programme, David Beasley, predicting that it’ll get even worse.

U.S. framers are working hard to establish a safe and secure food supply domestically while climate change is creating new challenges every day. I interviewed Mac Marshall the Vice President, Market Intelligence for the United Soybean Board (USB) for an update on just how the world’s current events are (and will be) affecting our food supple. His background includes serving as a staff economist at the US Bureau of Labor Statistics with a focus on agriculture commodities.

Marshall told me that he would be remiss if he didn’t point out that last month we had inflation numbers showing annualized inflation across the board of eight and a half percent and that much of that is being driven in both the food and the energy sectors here in the US. He also points to the fact that here in the US we don’t spend a ton of money on food (as compared to other countries) relative to our total consumption. We spend under 10% on our food he says, but the rest of the world is not in that same place. There’s a lot of food insecurity globally that exists in any time and environment, but he thinks it’s becoming really acute right now. Certainly the disruption, the war, the human tragedy, the cost that is happening you in Ukraine is, incredibly relevant for the global food supply.

Ukraine is a major producer and exporter of small grains including corn, wheat, and barley, but is a major producer of sunflower oil and actually exports about half the world’s supply of sunflower oil. When you look internationally and look at the markets that Ukraine sells into a lot of those markets are very price sensitive and very reliant on imported grains and in veggie oils for their domestic food supplies. Food insecure nations have a lot of price sensitivity. Anytime you have a shortage, the impact of it becomes that much more paramount.

Mr. Marshall says that it’s important to know, that while we point to the disruption over the last weeks with the war in Ukraine, we had been in a (bad) situation on the veggie oil side for a couple years. If we think globally about the major vegetable oils, be it soybean oil, palm oil, sunflower oil, grape seed oil, or canola oil , there’s been disruptions across all of these. If you look in the black sea, even a couple years ago, predating where we are now, there were short crops in sunflower seed production in both Ukraine and Russia. Last year, he points out, we had a drought across Southern Canada in the prairies where canola production is centered. This year in south America that is facing a second consecutive year of La Nińa, we’ve seen over 30 million tons of projected soybean production come off of the books. And in Southeast Asia with Palm oil, we’re faced with the reality that this production has to face that it emanates from an older part of the tree cycle. Palm oil is a 25-year crop; and with trees being older and in a less productive phase overlaid with some of the labor issues that have cropped up on Palm oil plantations where they are not be able to bring in for labor due to COVID restrictions. (Note: and that was prior to last week’s announcement that Indonesia has expanded their export ban on Palm oil – which is used in much of the world’s snacks and processed foods).

Mac Marshall is trained in time series analysis, to look a the history of food prices and the evolution of commodity market development over time. He says that unfortunately the position that we’re in right now, is an amalgamation of the political disruptions along side the supply chain disruptions and the production shortfalls.

Ever the optimist, Marshall says the future (of food) is bright. He cautions that it’s very, very easy, when you’re in the world of commodity markets and market analysis, to have some degree of recency bias and be focused on the here and now. But as he looks ahead, several years down the line he says that we’ve got continued innovation happening on the input side. That farmers in the US have been able to continue to produce more and more do so in an efficient way. Last year he points out that farmers produced a record soybean crop; against the backdrop of a lot of drought conditions that prevailed through much of the summer. So he thinks that output really underscored the resilience of the US production and it is that resilience that will be critical in the years to come .

He suggests that rebounding from the current global agriculture situation will take a couple of seasons when you focus on a global level with an integrated food supply chain; which has certainly come under pressure over the last couple years through COVID as well as just other disruptions and logistical corridors. It is these periods of disruption when the world, he says, is really feeling these pain points that also lead to creative solutions to help get out of it and set a better stage for the future. He believes that the troubles that are unfolding right now can also be catalytic in creating efficiencies going forward that allow for greater levels of food security.

Marshall says the food and agriculture world has a major role in addressing these really critical human and global challenges in order to stabilize the environment domestically and globally.

Until every farmer, rancher and food company embraces Marshall’s challenge, there is no doubt in my (Phil) own crystal ball, that we will continue to see prices rise on our supermarket shelves.