“Could worsen and even lead to rationing”
Another week has gone by, and the outlook for global food and energy markets continues to worsen.
President Biden addressed looming food shortages during today’s NATO press conference, saying it’s “going to be real”. This followed France’s Macron noting a week earlier that “Europe and also Africa will be very deeply destabilized in regards to food”, further explaining that “several African countries will be affected by famines within 12 to 18 months”. This timeline may have been too optimistic if developments in Lebanon are any indication. The country normally buys “96 per cent of its wheat from Russia and Ukraine”, but with the war complicating normal ordering (to put it mildly), importers have struggled “to get dollars from a subsidy programme” designed to help buy wheat from new suppliers and “have started rationing what they sell to supermarkets amid widespread panic buying”. While supplies could last “about a month”, one wheat importer said that if it fulfills demand, “our stocks will be gone in two weeks. It’s like a run on the bank”. Hoping to avoid any disruptions, having already instituted an export ban, “Egypt is in talks with Argentina, India, France and the United States for future wheat imports” after it has earlier fixed prices for unsubsidized bread “because of the recent price increases”. In contrast, the Chinese are dipping into their own “rainy day” stock of fertilizers and “has begun to release over 3 million tonnes of reserved nitrogen, phosphorous and compound fertilisers”. It also notably excluded “fertilizer producers from the list of high energy-consuming companies” last year amid its energy troubles.
On the energy side, while we had previously discussed some of the problems Europeans were facing, the “risk of physical shortages of diesel” in Europe is making new headlines. With imports from Russia gone, feedstocks also off the table, and the price of biodiesel inputs surging, Europe faces a “dire diesel supply situation”. The commensurate surge in prices has already caused some fallout. Spain’s government is “considering fuel price reductions” as it works with truckers unions that have gone on strike, which is “likely to aggravate a shortage of food products in supermarkets across the country”. Hoping to avoid similar negative reactions, the UK announced “an immediate cut to fuel taxes”. Additionally, the German government is considering implementing a state fuel subsidy, among other policies, to combat “the wave of price increases throughout the energy sector”. Meanwhile, stateside, Delaware joined California in trying to provide some relief for rising prices at the pump, with a new plan calling for “$300 in direct payments to Delaware taxpayers”.
It remains to be seen if Larry Fink is correct in his assessment that the economic disruptions we are seeing are indicative of “an end to the globalization we have experienced over the last three decades”, but these policies aren’t exactly letting the “invisible hand” work its magic. Time will tell if governments increasingly play a role in determining the who, the what, the how, and the how many economic interactions. No soup for you!?!
