Food Shortages in America and the World

  • Droughts affect seeds, seeds affect planting, and planting affects yields.
  • Nearly 87% of African income is spent on food.
  • The Russia-Ukraine war and its sanctions make the situation much worse.

A chief event of life is the day in which we have encountered a mind that startled us.

That quote from Ralph Waldo Emerson is one of my favorites.

And I never use it lightly.

Good morning from yet another lovely day in Northern Italy.

The Nazzie was down another 3% yesterday, and I was sorely tempted to heap scorn upon it in today’s Rude.

That tech and crypto got crushed again – poor Cathie Wood’s ARKK was down over 10% yesterday – is no surprise.

But AAPL down 5.18%?  Now we may have hit the point of “sell what you can.”

And that’s really not good.

But I want to wait another day for the charts to settle.

Instead, today I’ll share with you an excellent Wiggins Session interview Addison conducted with my paisano, Mark Rossano.

Mark is one of the guys who’s broadened my horizons.

In this newsletter, I’ve mentioned him before as the “Sherlock of the Supply Chain.”

But as the supply chain has come to the fore in all our lives, his hard work, insider knowledge, and generosity in sharing have become all the more valuable.

I love this Wiggin Session because Mark uses concrete examples with informative statistics to illustrate just what a pickle the world is in right now.

No ranting about politics.  Just sound and sober analysis.

I’ve taken a few choice snippets from the transcript.

I hope it whets your appetite.

Rossano on droughts and how they affect seeds, which affect yield:

When you look at droughts, they are becoming longer lasting and warmer. And when you look at seeds and planting in general, we have a big problem because a seed is a being.

It’s alive, it’s well, it’s meant to survive. So when, if there’s not enough moisture in the ground, the seedling says, “Okay, it’s going to be one of those types of years. I’m going to be smaller and conserve water.”

All of a sudden, you have a yield issue. There are only so many different things that can be done to offset that in terms of irrigation, coming back to water shortages, or putting down different fertilizers in order to try to force it to be bigger than it really wants to be because of what the seedling senses in the actual soil composition.

Rossano on why you shouldn’t panic in America when it comes to food:

The US feeds itself. We export the excess.

You may not go to the food store and be able to pick 17 different types of apples. You may only get three.

You may go there and want to make something for dinner, and two of the ingredients are missing, but you’re going to be able to eat.

That is not an issue. It’s just you’re not going to have the options that we’re used to.

I think the bigger shock to the American psyche.

Rossano on the what the Arabs call the “Arab Spring” and why:

When you look at 2011 in the US, we call it the Arab Spring.

But when you go abroad, they call it the Peasant Uprising.

And the Peasant Uprising, which started in Egypt and happened in Syria: it was all over food.

It was the fact that Arabs couldn’t get wheat. They couldn’t make bread.

And suddenly, that started to create and bring to the surface what was already bubbling there.

It’s not like there weren’t issues on the political level. There weren’t tribal problems.

But it takes something to snap it. What is the last straw?

And let’s be fair, if you can’t feed your family, what are you going to do?

That’s when you start to see rioting, that’s when you start to see violence, that’s when things really escalate.

Because if I were to tell you that if you cross this invisible line and kill that family over there, your family’s going to eat.

That comes back to one of my favorite quotes: “I don’t go to war because I hate the man in front of me, but because I love those behind me.”

And that’s where food comes in, because it comes down to securing your own safety and propagating your family.

Rossano on the coming Wheat Wars:

So you look at Latin America, which has had multiple years now of drought, where Brazil is a very big exporter of soybeans, with almost 70% of them going into China and the Asian continent.

But as those numbers come down, well, where do you go and get additional soybeans?

Then you look at Argentina, which has seen their wheat come down.

Argentina was an exporter of about 5% of the global total of wheat in the market. And they’re now going to struggle to export anything.

The US was an exporter of 13%. So now you have these shrinking, so then you have a bigger and bigger problem.

Then you take the Russia-Ukraine war, Russia was 20% of the global export market. Ukraine was 8%.

So you’re talking almost 28% of the wheat exporting market has been called into question.

Rossano on the difference between US and African opportunity costs:

Now you go abroad where the average person lives on $1.80 a day in places like Nigeria, other parts of Africa, and large parts of Central Asia.

This is something where in the US, anywhere between 25 to 30% of income is spent on food and given this is just a broad look at how money is spent.

But when you go abroad, 85 to 87% of their income is spent on food.

So when you get a meaningful spike in pricing, all of a sudden, you have this weird conundrum of, “Okay, am I buying medicine or am I buying food?”

“Am I buying food, or am I going to worry about paying the electricity bill?”

You start to see this struggle, and food’s always going to win out.

But then you get angry, and there are things that start to come to the surface that haven’t before.

Rossano on the fertilizer issue and how sanctions make the situation worse:

Just recently, the WTO told Brazil that they need to export more grains. Brazil kind of laughed, looked around, and said, “From what storage? From what stockpile? We’re run dry. We have nothing to sell in the market.”

“Oh, and by the way, we’re still waiting for you to release the 27 Russian vessels that have our fertilizer.”

Wrap Up

It’s a treat when you’ve got access to someone of Mark’s caliber.

Here’s the link to the full Wiggin Session with Mark, which is only 35 minutes long.

Have a watch – I usually do it at 1.5x speed, so I get all the info and none of the “verbal graffiti.”

I’ll be back tomorrow with a look at the tech market.

Is it time to call it?  Or will the Nazzie magically resurrect itself?

We’ll see.

Until tomorrow.

All the best,

Sean  

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